Years of investor and regulator demands for greater transparency in financial reporting amongst listed companies is now affecting attitudes in the world of privately held businesses. More than half of leaders of privately held businesses (PHBs) globally (52%) believe that greater transparency is a key benefit of financial reporting according to latest research from the Grant Thornton International Business Report (IBR) 2010 (see figure 1). The research covers the opinions of over 7,400 business owners across 36 economies. Businesses in Ireland, the Philippines and Taiwan were most enthusiastic about greater transparency with 85% of businesses citing greater transparency as a key benefit.
Said Alex MacBeath, global leader - markets at Grant Thornton International, "These results indicate that even though PHBs are often under no obligation to report information about their financial results or legal structures, business leaders are increasingly recognising that in order to compete and grow they need to be more transparent and more readily comparable with competitors."
Businesses recognise that financial reporting will help them to grow their business with 37% citing easier access to capital as a key benefit along with facilitating cross border trading (17%).
At the same time, business owners were also asked if they had heard of International Financial Reporting Standards for Small and Medium sized Enterprises (IFRS for SMEs). IFRS for SMEs provides a substantially simplified set of internationally recognised accounting principles specifically for PHBs. Said Alex MacBeath, "The adoption of IFRS for SMEs will allow PHBs to be more transparent and directly comparable with similar businesses around the world - a global solution to their increasing desire for greater transparency."
53% of businesses owners globally said they were aware of IFRS for SMEs. Regionally, business owners within the EU are the most likely to be informed (67%) with awareness highest in Ireland (86%), Spain (79%), Finland (78%) and the UK (76%). Business owners in Asia Pacific countries are the least likely to have heard of IFRS for SMEs, with Japan (19%) and Thailand (18%) being the least informed.
Where business owners were already aware of IFRS for SMEs, they were asked if they would like their country to adopt the standard. Globally 52% of business owners said they would like their country to adopt IFRS for SMEs with businesses in Mexico (89%), the Philippines (85%) and Chile (84%) most supportive. In some countries plans are already in place to adopt the standard, while in others (including the Philippines) the standard has since been adopted.
Said Jaime Goni, an audit partner from Grant Thornton in Chile, "In Chile it is mandatory for all financial statements to be presented under full IFRS. This is a complex and time consuming process for smaller businesses. IFRS for SMEs is less complex but still provides for comparable financial information that will allow convergence across all entities interacting with the financial sector."
Alex MacBeath explains, "Unlisted businesses around the world who currently have to comply with full IFRS will be pleased to find that the new standard is about one tenth of the length of full IFRS and that the number of potential disclosure items will be nearer to 300 than the current 3,000."
Reduced cost is also regarded as a benefit of financial reporting by 44% of businesses globally and 15 countries cited it as the most popular benefit of all. In Ireland, 89% of businesses cited reduced cost as a benefit, the highest proportion of all countries, followed by Malaysia (85%) and Denmark (80%). Japan (3%) and Botswana (11%) are the least likely to say that reduced cost is a benefit of financial reporting. Regionally, NAFTA, EU and Nordic countries are most likely to cite reduced cost (53%, 51% and 50% respectively), whilst Latin America and Asia Pacific are the least likely (both 33%).
Less complexity is cited by a third of businesses globally as a benefit of financial reporting. Belgium was the only country to cite less complexity as the top benefit (50%) although higher proportions in Ireland (87%) and Malaysia (79%) cited this as one of the key benefits of financial reporting.
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