Factors Affecting the Adoption of Financial Reporting Standards by Micro, Small and Medium Enterprises in Tanzania: The Case of Mbeya City Council
Different studies have revealed that the majority of the micro, small and medium enterprises (MSMEs) in Tanzania do not use basic accounting principles and practices which are consistent with financial reporting standards in managing business though Tanzania adopted International Financial Reporting Standards for small and medium enterprises (IFRS for SMEs) in 2009 and issued financial reporting standard for Micro entities in 2018. This shows that the level of adoption and applicability of the standards is very low. Therefore, this study was carried out to assess factors that affect the adoption of financial reporting standards by MSMEs in Tanzania. The study was conducted in Mbeya City Council where primary data was collected from a sample size of 245 respondents via a Likert scale questionnaire. The descripto-explanatory research design was employed where the results were quantitatively analysed through descriptive statistics and chi-square (x2) model hypothesis testing. The results show that non-adoption of the standards was the result of inadequate knowledge by MSMEs, lack of awareness by most MSMEs on the existence of the standards, high perceived cost of conversion and implementation, weak legal and regulatory enforcement strategy, low level of technology applicability by SMEs and complexity of the standards as it needs a well-trained accountant to implement. The study recommends the government to come up with the implementation strategy that will first ensure that a large number of MSMEs is well trained on financial reporting standards because the decision to adopt or not to adopt largely depend on the adequacy of knowledge.
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