Level of IFRS Compliance among Small and Medium-Sized Enterprises in Western Uganda: Evidence from Mbarara City

Abstract

This study examined the level of compliance of small and medium-sized enterprises (SMEs) in Western Uganda with International Financial Reporting Standards (IFRS), with emphasis on IFRS for SMEs. The study was motivated by the persistent gap between the expected benefits of IFRS-based reporting, including transparency, comparability, reliability and decision usefulness, and the practical realities of SMEs that often operate with limited accounting capacity, weak record-keeping systems, high compliance costs and uneven institutional support. A mixed-methods design with descriptive and explanatory survey orientation was used. The target population comprised 434 registered SMEs in Mbarara City, from which a target sample of 250 SMEs was planned. The quantitative analysis was based on 200 SMEs for the descriptive adoption evidence and 203 valid cases for the broader SmartPLS model. Qualitative stakeholder evidence was used to interpret the depth and unevenness of compliance. The findings showed that only 44 SMEs, representing 22.0%, had adopted IFRS or IFRS for SMEs, while 156 SMEs, representing 78.0%, had not adopted IFRS. Among adopters, 61.0% had adopted within the previous one to two years, 61.0% used IFRS for SMEs rather than full IFRS, and 80.0% reported increased implementation costs. The evidence therefore indicates low, recent and uneven IFRS compliance among SMEs in Western Uganda. The study concludes that IFRS compliance among SMEs should be understood as an organizational capability rather than a mere legal requirement. It recommends phased implementation, simplified sector-specific guidance, subsidized training, affordable accounting clinics, SME-friendly reporting templates, and a coordinated institutional framework involving regulators, professional bodies, universities, local governments and lenders.