Adopting the international financial reporting standard for small and medium-sized entities in Saudi Arabia

Abstract

PurposeThe paper investigates attitudes towards and perceptions of the adoption of the International Financial Reporting Standard (IFRS) for small and medium-sized entities (SMEs) in Saudi Arabia, immediately before and during the period of adoption.Design/methodology/approachThe study adopts an interpretive approach, using a new institutional theory framework, drawing on concepts of institutional isomorphism and institutional logics. Research was undertaken using extensive interviews of business owners and managers, accountants, auditors, regulators and others. Interviewees were identified using snowball sampling, and the paper discusses the appropriateness of this method for research in management in MENA countries.FindingsThe adoption of IFRS, and in particular IFRS for SMEs, in Saudi Arabia can be understood best as an example of mimetic isomorphism, as many respondents suggested that the country adopted these standards in order to emulate other countries in the Gulf Cooperation Council and the G20 group of countries.Practical implicationsThe study examines issues relating to the adoption of IFRS for SMEs in an emerging economy where adoption was not imposed by international financial institutions.Originality/valueIn addition to being the first study of the adoption of IFRS for SMEs in Saudi Arabia, the paper examines snowball sampling as a particularly useful method in MENA countries.

Predicting Islamic Finance Adoption Behavior by MSMEs: Institutional Theory Approach

“…In addition, it is also driven by the perception of the benefits received by other MSMEs adopting Islamic finance or by other well-known MSMEs, even without certain success. These results are in line with Chathurangani and Hemathilake (2019), Bakr and Napier (2020), Sadress et al (2019), andTalib et al (2020).…”

“…This situation will encourage MSMEs to carry out a mimetic process by imitating MSMEs or other organizations to meet the needs of these financial products and services. Mimetic mechanisms have also been shown to have a significant role in some adoption behaviors, both in the context of MSMEs as in a study by Bakr and Napier (2020), Sadress et al (2019), Caldera et al (2019), Masocha and Fatoki (2018), and Raghavan et al (2018), as well as in the context of Islamic business and finance, as researched by Bashir (2019a) and Talib et al (2020). Therefore, the following hypothesis could be formulated:…”

Knowledge and use of accounting software: evidence from Oman

“…Negative effects of the usage of accounting software are increased cost, lack of education on the benefits of the usage and lack of knowledgeable personnel. Ibrahim et al (2020) and Pulakanam and Suraweera (2010) analyzed and found that small businesses, while implementing small business accounting software, face many barriers, such as nonuser-friendly and non-availability of software vendors' support and guidance (Bakr, 2020). Ashrafi and Murtaza (2008) in their study provided that only a very a smaller number of SMEs in Oman are aware of the available accounting software and its adoption.…”

Impact of corporate governance mechanism on IFRS adoption: A comparative study of Saudi Arabia, Oman, and the United Arab Emirates

“…Mimetic isomorphism refers to the imitation of what institutions consider successful practices of other institutions. On the other hand, “normative” isomorphism indicates that the institution follows what is widely seen to be “best practice” and followed such as IFRS and US GAAP ( Bakr and Napier, 2020 ). IFRS adoption is also justified by signaling theory, where companies tend to signal to investors by adopting extra mechanisms and additional information disclosures ( Barth et al., 2008 ).…”