SMEs' Knowledge and Application of IAS21: Challenges, Opportunities and Implications for Financial Reporting

Abstract

In today’s global economy, small and medium-sized enterprises (SMEs) are increasingly participating in international trade, which requires adherence to international accounting standards such as IAS 21, governing the accounting for foreign currency transactions and the translation of foreign operations. Despite the importance of promoting financial transparency and comparability, many SMEs encounter significant challenges in effectively implementing IAS 21 due to limited resources, technical expertise, and infrastructure. This integrative review critically examines existing academic and practitioner literature on SMEs’ understanding and application of IAS 21, highlighting key obstacles, opportunities, and implications for financial reporting practices. Drawing on Institutional Theory, Contingency Theory, and the Resource-Based View, the study explores how internal capabilities and external influences influence SMEs’ compliance behaviours. The review also underscores the importance of tailored policy measures and capacity-building initiatives to support SMEs in meeting the standard’s requirements. The study aims to provide a deeper understanding of how SMEs operationalize IAS 21 and offers recommendations for enhancing the quality of their financial reporting within a globally interconnected environment by synthesizing evidence from various sources.