Adoption of the International Financial Reporting Standard for Small and Medium-Sized Entities: The Impact on Accounting Quality

Almost a decade has passed since IFRS have been mandatorily applied in EU countries for public firms. On the contrary, the effect on accounting quality of the recent adoption of the IFRS for SMEs has not been studied enough due to the lack of EU countries that have adopted it. Our research investigate the use of the IFRS for SMEs by focusing on the shift from local accounting standards to the IFRS for SMEs in Greece in 2014, covering the first three fiscal years of the application of the new standards. The question is whether the implementation of the IFRS for SMEs has improved the quality of earnings reporting by SMEs. We employ the Jones modified model and discontinuity tests on a sample of non-financial firms in order to study the effect. The results obtained show that earnings management has intensified since the adoption of the IFRS for SMEs.