Challenges Faced by Zambia’s SMEs in Adopting International Financial Reporting Standards for SMEs

Abstract

Small and Medium Enterprises (SMEs) contribute approximately 70% of Zambia’s GDP and represent 97% of all businesses. Despite their significance, many Zambian SMEs struggle to adopt International Financial Reporting Standards (IFRS) for SMEs, introduced to simplify financial reporting. This study investigates these challenges, focusing on SMEs in Ndola, Zambia. Using a qualitative descriptive approach, data was collected from 18 purposively selected SMEs via questionnaires. Results reveal that 94.44% of participants were aware of IFRS for SMEs, yet only 38.88% had adopted the standards. Key barriers include the optional nature of IFRS for SMEs, inadequate accounting education, and high implementation costs. Despite these challenges, adopters cited benefits such as enhanced financial reporting quality and tax compliance. This study highlights the need for mandatory adoption and enhanced training programs to improve financial reporting practices among SMEs.