Evaluating the Barriers to IFRS for SMEs Adoption: A Comparative Analysis of Adopters and Non-Adopters among SMEs in North Rift Region, Kenya

Abstract

This article examines barriers to adopting the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) by comparing adopters and non-adopters among SMEs in Kenya’s North Rift region. Despite providing a simplified financial reporting framework, adoption remains uneven, particularly among resource-constrained enterprises. A quantitative survey approach was adopted, with 397 SMEs targeted for participation. Of these, 304 submitted valid responses, yielding a response rate of 76.6 per cent. The final analytical sample comprised 195 adopters (64.1%) and 109 non-adopters (35.9%). Descriptive statistics identified challenges reported by non-adopters, while Mann–Whitney U tests compared the two groups across three constructs: capacity and training, management commitment, and perceived adoption cost. Among the 105 non-adopters who responded to the follow-up question, inadequate IFRS knowledge and skills were the most frequently reported challenge (44.8%), followed by implementation costs (16.2%) and inadequate accounting systems and infrastructure (14.3%). The findings indicated that adopters and non-adopters did not differ significantly in capacity and training (U = 9,673.50, p = .191) or management commitment (U = 9,741.50, p = .226). However, perceived adoption cost significantly differentiated the groups (U = 7,895.00, p < .001), with non-adopters recording a higher mean rank (177.57) than adopters (138.49). The findings suggest that although knowledge and skills constraints are prominent, perceived adoption cost provides the clearest statistical distinction between the groups. The study recommends affordable implementation support, targeted training, and improved accounting infrastructure to facilitate adoption.