The emergence of International Financial Reporting Standards IFRS as well as International Financial Reporting Standards for Small and Medium-sized Enterprises IFRS for SMEs issued by th
O verview of research situation
As the domestic economy increasingly integrates with the global marketplace, businesses are compelled to broaden their trade markets, leading to heightened demand for robust financial markets This globalization has highlighted the inadequacies of national accounting principles in meeting the evolving information needs of international investors In response to the competitive pressures of attractive foreign markets and the demand for improved financial transparency, regulatory agencies are striving to enhance financial accounting standards The aim is to establish a cohesive set of accounting standards that deliver uniform, high-quality information to stakeholders both domestically and globally To facilitate this objective, the International Accounting Standards Board (IASB) has introduced a comprehensive framework of International Financial Reporting Standards (IFRS), fostering a consistent international business environment.
R eason for choosing the topic
International Financial Reporting Standards (IFRS), developed by the International Accounting Standards Board (IASB), provide a consistent framework for preparing and presenting accounting reports globally As economic globalization progresses, the adoption of IFRS in financial reporting is gaining traction, with 119 countries mandating its use for public entities and an additional 12 countries permitting its application, according to the IFRS Foundation's May 2016 statistics.
In today's globalized economy, the adoption of International Financial Reporting Standards (IFRS) in Vietnam offers significant advantages for local businesses Implementing IFRS allows partners and foreign investors to assess financial information based on a unified standard, facilitating informed business and investment decisions that enhance investment effectiveness.
The adoption and implementation of IFRS vary significantly across countries, primarily due to differences in institutional structures Research indicates that international organizations like the World Bank and the International Monetary Fund exert considerable influence on developing nations' decisions to embrace IFRS, leading many of them to adopt these standards since 2005 However, there is a notable lack of research focusing on the institutional factors affecting the application of IFRS for SMEs in Vietnam.
Researching the factors influencing the adoption of IFRS for SMEs in Vietnam is both timely and essential The authors have chosen the topic "Studying the Impact of Applying International Accounting Standards (IFRS for SMEs) in Small and Medium Enterprises in Ho Chi Minh City" to explore this issue The findings aim to provide valuable insights that will facilitate the implementation of IFRS for SMEs in Vietnam.
R esearch objectives and questions
This thesis aims to enhance international integration in auditing and accounting within Vietnam by increasing awareness among SMEs about the effects of adopting IFRS By doing so, it seeks to improve operational efficiency and formulate suitable policies for the implementation of IFRS in Vietnamese SMEs.
This article explores the effects of implementing IFRS for SMEs on small and medium-sized enterprises in Ho Chi Minh City, highlighting its role in enhancing international integration in Vietnam's auditing and accounting practices.
- Identify and determine factors affecting the application of IFRS for SMEs at small and medium-sized enterprises in HCMC.
- Measure and analyze the influence of each factor on the application of IFRS for SMEs at small and medium-sized enterprises in HCMC.
To clarify the proposed research objectives, the thesis content needs to answer the following corresponding questions:
- What factors affect the application of IFRS for SMEs in small and medium-sized enterprises in the city? Ho Chi Minh?
- Assess the influence of each factor on the application of IFRS for SMEs at small and medium-sized enterprises in the city What is Ho Chi Minh like?
S ubject and scope of research
Small and medium-sized enterprises in HCMC City according to Vietnam's regulations in Decree No 80/2021/ND-CP issued from Articles 5 to 10 on "Criteria for determining small and medium enterprises".
Spatial scope: Small and medium-sized enterprises in Ho Chi Minh City.
Time range: Data collected from November 2023 to January 2024.
Q uantitative research methods
The author conducted surveys and utilized SPSS software to assess the reliability of the Cronbach’s alpha scale They performed exploratory factor analysis (EFA) and developed a linear regression model, along with Pearson correlation analysis, to evaluate the impact of various factors on the implementation of IFRS for small and medium enterprises in Vietnam.
R esearch paper structure
• Chapter 1: OVERVIEW OF THE RESEARCH PROBLEM
Presents an overview of research related to the impact of applying IFRS for SMEs in small and medium-sized enterprises abroad and domestically.
Present the theoretical basis and at the same time analyze hypotheses and previous research models to build a foundation for arguments and choose an appropriate research model.
Presents the content of research methods, sampling methods, questionnaire design for measurement scales and data analysis methods.
• Chapter 4: RESEARCH RESULTS AND DISCUSSION
Presenting research results, information about the survey sample, testing the model and measuring research concepts, analyzing and evaluating the results obtained.
The study concludes with a comprehensive analysis of data, offering valuable insights that assist managers in making informed decisions regarding the implementation of IFRS for SMEs in their operations It also highlights the limitations of the research and suggests potential directions for future studies to enhance understanding in this area.
RESEARCH OVERVIEW
O verview of foreign research
[I] Zeghal, D & Mhedhbi, K.(2006) An analysis of the factors affecting the adoption of international accounting standards by developing countries The International Journal ofAccounting, 41, 373-386.
This study investigates the key factors influencing the adoption of IAS/IFRS in developing countries, focusing on the impact of educational levels, cultural contexts, economic growth, readiness for integration, and the availability of economic and capital markets.
A quantitative study involving 64 developing countries, including 32 that have adopted IAS/IFRS, reveals that advanced education levels, capital market availability, and cultural factors significantly influence the application of these international accounting standards In contrast, economic growth and openness to economic integration show minimal impact The findings highlight the critical role of high-quality accounting information in fostering business development and attracting investment Consistent with previous research, the study underscores the importance of educational levels, cultural composition, and capital market dynamics in the adoption of accounting systems These insights are valuable for countries and accounting regulators aiming to promote IAS adoption in developing regions.
A study by Nadia Albu and colleagues (2011) investigates the implementation of IAS/IFRS in Romania, an emerging EU member Utilizing a theoretical framework focused on institutions and structures, the authors explore two distinct phases of IAS/IFRS implementation, drawing on primary data from interviews with key financial reporting actors and secondary data from post-communist accounting regulations The findings reveal that the first phase, driven by coercive external forces like the World Bank, resulted in limited practical implementation due to insufficient supportive factors In contrast, the second phase, although narrower in scope, led to a more significant change process for listed companies and financial institutions The authors conclude that Romania's IFRS implementation is characterized by low compliance levels and resistance to change, influenced by taxation priorities, inadequate educational resources, and the declining strength of internal coercive factors This case highlights that the motivations behind IFRS implementation are primarily local, underscoring the contextual nature of global IFRS adoption and its associated challenges.
O verview of domestic research
In 2017, Associate Professor Dr Vo Van Nhi and Dr Tran Thi Thanh Hai examined the establishment of a set of accounting standards specifically designed for small and medium-sized enterprises (SMEs) in Vietnam, aligning with the International Financial Reporting Standards (IFRS) for SMEs framework.
The author highlights that Vietnam encounters significant challenges in the immediate implementation of IFRS, particularly IFRS for SMEs, due to variations in the political, legal, business, cultural, and educational environments Research and surveys conducted with experts and accountants from small and medium-sized enterprises reveal persistent obstacles in adopting IFRS for SMEs Consequently, the author advocates for a gradual implementation process that facilitates understanding and compliance with accounting standards among SMEs Additionally, it is essential for the state’s management mechanisms to be adapted to align with the market economy, enabling SMEs to achieve sustainable integration into the international market.
The authors have identified key factors impacting the application and management of accounting practices, particularly in small and medium enterprises (SMEs) A lack of awareness among SME managers regarding the importance and advantages of adopting IFRS for SMEs results in insufficient guidance for accounting personnel Additionally, the qualifications and understanding of accountants play a crucial role in the effective implementation of accounting standards, highlighting the need for improved training and support in this area.
(2) Mandatory regulations with strict constraints on the application of IFRS for SMEs from the slate, along with separate, in-depth accounting training programs for SMEs
To address integration pressure, the authors recommend developing a roadmap for establishing accounting standards tailored for Vietnamese SMEs These standards should align with international benchmarks while being consistent with the unique operational characteristics of these businesses.
In the research conducted by Do Khanh Ly (2022) titled "Factors Affecting the Level of Readiness to Apply International Financial Reporting Standards for Businesses in HCMC," both qualitative and quantitative methods were employed to assess the readiness of local businesses for IFRS implementation The qualitative approach involved refining existing scales to fit the context of HCMC, while also identifying new factors influencing readiness Meanwhile, the quantitative analysis aimed to measure the impact of these factors on businesses' preparedness for IFRS adoption This study seeks to evaluate the readiness of HCMC businesses ahead of the planned IFRS application roadmap, ultimately aiming to mitigate negative impacts and enhance support for these enterprises.
The study analyzed 238 survey questionnaires using descriptive statistical techniques, including Cronbach’s Alpha test, exploratory factor analysis, and PLS-SEM analysis Results identified four direct factors and one indirect factor influencing the readiness to implement IFRS in Ho Chi Minh City, Vietnam The factors ranked by impact were: manager support (0.455), perceived challenges (0.366), perceived benefits (0.251), adverse perceptions (0.227), and knowledge about IFRS (0.189) as the indirect factor The PLS-SEM model revealed a positive correlation between manager support and perceived benefits, affecting readiness to apply IFRS, while perceived challenges and disadvantages negatively influenced readiness Additionally, the research clarified the relationship between management support and IFRS readiness and successfully developed a measurement scale based on Guerreiro et al (2008) for future studies However, limitations include the exclusion of other factors, a non-probability sampling method, and a focus on five specific localities: Ho Chi Minh City, Hanoi, Da Nang, Binh Duong, and Dong Nai province.
R esearch gaps
An overview of previous studies on the application of IFRS for SMEs, both internationally and domestically, highlights the growing global trend towards a unified economic framework and underscores the significant role of SMEs in national economies The research primarily employs exploratory methods to address challenges faced by countries, businesses, and practitioners, yet often lacks a discussion of foundational theories in developing research hypotheses and models Key factors influencing the application of IFRS for SMEs include legal origin, economic growth, foreign activities, audit types, business scale, cost-benefit considerations, and the qualifications of accountants These factors indicate that SMEs continue to face numerous challenges that require urgent attention and solutions to effectively implement IFRS for SMEs in the future.
The author observes that existing domestic and international studies on SMEs applying IFRS for SMEs predominantly emphasize objective and macro factors, which are largely outside the control of businesses, including both large enterprises and SMEs Consequently, these studies fail to adequately capture the specific challenges faced by SMEs Furthermore, the author notes that research focusing on the micro and subjective factors affecting SMEs, both locally and globally, remains fragmented and insufficient.
In light of existing research both domestically and internationally, it is evident that there are significant gaps in understanding the factors influencing the implementation of IFRS for SMEs in Ho Chi Minh City Continued and systematic investigation into this topic is essential for a comprehensive understanding and effective application of these standards.
THEORETICAL BASE AND RESEARCH MODEL
S mall and medium enterprises (SME s )
2.LI Definition of small and medium enterprises
Small and medium enterprises (SMEs) are classified into three categories based on capital, employee count, and product revenue According to the World Bank Group, micro-enterprises have fewer than 10 employees, small enterprises range from 10 to under 200 employees with capital below 20 billion VND, and medium enterprises have between 200 to 300 employees with capital ranging from 20 to 100 billion VND In Vietnam, the government has established regulations for SMEs through Decree 80/2021/ND-CP issued in August.
26, 2021, defining criteria for medium enterprises with 200 to 300 employees and small enterprises with 10 to 20 employees , and micro-enterprises with fewer than 10 employees.
These businesses have officially registered their operations in compliance with legal requirements and are categorized into groups based on their total capital or average annual employee count.
2.1.2 Characteristics and importance of small and medium enterprises
Small and Medium Enterprises (SMEs) in Vietnam and worldwide possess distinct characteristics that set them apart from larger corporations Typically, SMEs operate with limited capital and struggle to access substantial funding from investment banks, hindering their ability to innovate and grow This financial constraint often results in challenges when competing against larger companies, particularly in the service sector, leading to potential losses in market share, especially in foreign markets Predominantly, SMEs focus on the commercial sector, engaging in buying, selling, and distributing consumer goods rather than concentrating on production and processing.
The above has a certain influence, leading to their financial reporting system also having its own characteristics:
Vietnamese SMEs typically operate as private enterprises, resulting in a simpler financial reporting system compared to larger companies However, recent developments in the Vietnamese stock market and a growing demand from investors have prompted many SMEs to voluntarily adopt the financial reporting standards of larger businesses.
Small and medium-sized enterprises (SMEs) typically concentrate on their core business activities, resulting in fewer intricate economic and financial connections Consequently, the financial statements of SMEs are generally less complex compared to those of larger corporations.
Due to limited resources and requirements for accounting tasks, small and medium-sized enterprises (SMEs) face significant challenges in investing in both equipment and human resources This results in subpar quality and insufficient information in financial statements (FSs) provided to users.
Small and Medium Enterprises (SMEs) play a crucial role in Vietnam's economy, comprising 95% of all businesses Their significant presence not only contributes to national output but also generates employment opportunities across the country As the backbone of the local economy, SMEs are found in every locality, enhancing budget revenues and addressing unemployment while fostering local economic development.
SMEs are small in size, they are easy to adjust and change to suit the needs of the economy And above all, SMEs contribute a significant proportion to national GDP
2.1.3 The necessity of accounting standards for small and medium-sized enterprises
The development of a distinct set of accounting standards for small and medium enterprises (SMEs) has been recognized as essential since the inception of the IASC, primarily aimed at alleviating the compliance burden of IFRS on these businesses This initiative has resulted in a comprehensive preliminary position statement on SME accounting standards (Camfferman and Zeff, 2006; Ram, 2012) The IFRS project for SMEs garnered significant support from countries involved in global accounting standard-setting; however, the unique characteristics of SMEs pose challenges in applying IFRS effectively, raising concerns about implementation (Albu, Albu, and Fekete, 2010).
Understanding the significance of IFRS for SMEs is crucial, as highlighted in the Rationale section of the IASB's Exposure Draft (2007) SMEs face unique challenges compared to larger companies, which affects their disclosure responsibilities Key factors include the specific information needs of users of financial statements, the intended use of these statements, the expertise available within the SME, and the financial burden of adhering to the same standards as larger entities This context has driven the development of IFRS for SMEs, which notably simplifies and reduces disclosure requirements compared to full IFRS, making compliance more feasible for smaller businesses.
In numerous countries, businesses of all sizes must adhere to standardized accounting regulations, yet small and medium-sized enterprises (SMEs) often struggle with the complexity of these requirements The intricate nature of various standards and regulations renders the reporting process both time-consuming and challenging Moreover, the creation of GAAP-compliant financial reports is considered not cost-effective for SMEs (Ram, 2012) Consequently, many SMEs have developed a distinct regulatory framework tailored to their specific needs.
The International Accounting Standards Board (IASB) aims to facilitate the creation of high-quality and consistent financial reports for small and medium-sized enterprises (SMEs) worldwide through the issuance of IFRS for SMEs, as noted by Chand, Patel, and White (2015) However, it is important to highlight that the IASB lacks the power to mandate the adoption of these standards by countries for their SMEs.
2.1.4 Users of small and medium-sized enterprise financial reports and information needs
According to Ram (2012), current regulations do not sufficiently consider the information needs of users of financial statements (FSs) from small and medium-sized enterprises (SMEs), raising concerns among regulators It is important to recognize that the users of SMEs' FSs differ from those of listed companies, as noted by Di Pietra et al (2008), who state that SMEs lack a dominant user group Users of SMEs' FSs can be categorized into internal users, primarily managers, and external users, including bankers, commercial creditors, credit agencies, and large suppliers (Ram, 2012).
IFRS for SMEs focuses on producing general-purpose financial statements (FSs) for external users who require specific information, such as owners not involved in management, current and potential creditors, and credit rating agencies These FSs are distinct from those prepared solely for owner managers, tax authorities, or government agencies, as the latter can request tailored information The IFRS for SMEs Basis for Conclusion further clarifies the primary external users of these financial statements.
External users of financial statements (FSs) include banks that provide loans to small and medium-sized enterprises (SMEs), suppliers who assess FSs to make credit and valuation decisions, and credit rating agencies that rank SMEs based on their financial data Additionally, customers rely on FSs to determine whether to engage in business with SMEs, while shareholders who are not involved in management also utilize this information to make informed investment choices.
Collis and Jarvis (2000) conducted a review of various studies on the financial statements of small and medium-sized enterprises (SMEs), identifying key users such as banks, owners or managers, and tax authorities.
H istory of IFRS FOR SMEs
The concept of unifying accounting standards was first introduced at the inaugural International Accounting Congress in St Louis in 1904 This idea gained further traction in 1957 during the 7th International Accounting Congress in Amsterdam, where Mr Jacobkraayenhof emphasized the necessity of establishing a cohesive system of international accounting standards.
Since 1966, professional organizations like the Institute of Chartered Accountants in England and Wales, the Canadian Institute of Chartered Accountants, and the American Association of Institutes of Chartered Accountants have engaged in discussions, spearheaded by Sir Henry Benson These conversations culminated in the formation of a research group tasked with conducting comparative studies of accounting practices and philosophies across the involved nations.
In 1972, during the 10th International Congress of Accountants held in Sydney, senior leaders of the research group initiated the establishment of international accounting standards by founding the International Accounting Coordinating Committee on the Accounting Profession (ICCAP), laying the groundwork for a formal organization dedicated to these standards.
The International Accounting Standards Committee (IASC) was established with member countries including Canada, Australia, France, Japan, Germany, Mexico, the Netherlands, the United Kingdom, and the United States The IASC's secretariat and headquarters are based in London.
Since its inception in 1973, the International Accounting Standards Corporation (IASC) has aimed to enhance the global convergence of accounting standards Its primary mission is to develop and promote internationally recognized accounting standards that improve and harmonize financial reporting regulations Despite issuing 26 accounting standards during its first 15 years, from 1973 to 1987, the IASC's impact on national standards and practices was minimal.
From 1988 to 1997, the International Accounting Standards Committee (IASC) concentrated on enhancing the quality of international accounting standards to meet the demands of the International Organization of Securities Commissions (IOSCO) and to support the development of global capital markets.
In 1995, the European Union (EU) viewed the promotion of international standards as an important strategy in developing accounting harmonization (European Commission,
1995) During this period, the IASC continued to issue seven accounting standards (Deloitte, 2013).
The International Accounting Standards Organization (IASC) acknowledges the necessity of adapting its strategy for developing international standards to enhance its recognition within the global community.
In 1997, the International Accounting Standards Committee (IASC) formed a Strategy Working Group to develop a new strategy By 1998, the IASC recognized that its previous focus on harmonization—selecting among existing accounting methods across various countries and seeking national acceptance—was no longer adequate for contemporary needs, prompting the need for a strategic shift.
In 1999, the Strategy Working Group released a report recommending reforms to enhance the organizational structure and operations of the International Accounting Standards Committee (IASC) The goal was to establish superior international standards for capital markets and to foster the convergence of national and international accounting standards Following these recommendations, the IASC implemented improvements, leading to the establishment of the International Accounting Standards Board (IASB) in 2001.
Over nearly three decades, the International Accounting Standards Committee (IASC) has accomplished significant milestones, growing to 156 members from 114 countries by the end of 2000 During this period, the IASC developed the Accounting Theory Framework and issued 41 international accounting standards, with 31 of these standards remaining valid until the end of the specified timeframe.
In 2000, 1ASC reached an agreement with IOSCO, leading to a significant recommendation from the IOSCO Technical Committee This recommendation urged national capital market regulators to permit foreign companies to opt for international accounting standards over local accounting standards.
From 1973 to 2000, the International Accounting Standards Committee (IASC) established the groundwork for the accounting convergence process by creating and advancing international accounting standard drafting organizations This foundational work set the stage for the subsequent phase of developing and promoting the unification of international accounting standards.
In 2001, the International Accounting Standards Board (IASB) was established to take over the standard-setting role previously held by the International Accounting Standards Committee (IASC) That same year, the IASC Foundation was created to oversee the operations, structure, and strategy of the IASB, as well as to provide its sponsorship.
The IASB's operational objectives differ notably from those of the IASC, focusing on the development of high-quality global financial reporting standards that cater to investors and other stakeholders involved in economic decision-making Additionally, the IASB aims to encourage the alignment of national accounting standards with international financial reporting standards.
"convergence” began to be officially used to replace the previous term "harmony”.
The International Accounting Standards Board (IASB) maintains existing international accounting standards while introducing new International Financial Reporting Standards (IFRS) Over the past decade, 14 new IFRS have been issued, and numerous existing standards have been revised and updated Additionally, the IFRS Framework, which provides the theoretical foundation for preparing and presenting international financial reports, was established in 2010.
B ackground theories
Modern institutional theory, rooted in the extensive research of DiMaggio and Powell (1983), posits that organizations tend to become increasingly homogeneous over time due to the interplay of internal and external environmental factors This convergence leads to a loss of diversity among organizations, highlighting the similarities in their identities and social relationships Consequently, the homogenization process emerges, characterized by uniformity, which compels organizations to adapt and align with others within the same operational context The pressures influencing this transformation can be categorized into three distinct types.
Modern institutional theory plays a significant role in research related to the application of International Standards This article utilizes the theory to analyze the relationship between international integration, business size, cultural influences, and the effects of domestic and foreign organizations, as well as the legal framework, in the implementation of IFRS for SMEs within Small and Medium Enterprises in Vietnam.
The Theory of Planned Behavior (TPB), developed by Ajzen in 1991, builds upon the Theory of Rational Behavior and explores how individuals form intentions that lead to specific behaviors Central to TPB is the idea that an individual's intention is the key predictor of their actions When a person possesses clear intentions and a sense of control over their actions, they are more likely to engage in those behaviors The theory identifies three critical determinants of behavior: attitude, subjective norms, and perceived behavioral control, which together help in understanding and predicting human behavior.
Figure 2.1 Model of the Theory of Planned Behavior
The Theory of Planned Behavior (TPB) suggests that as global standards for accounting evolve, the influence of social pressures and the integration process will significantly shape the attitudes of business administrators and accountants This shift in perspective highlights the advantages of adopting International Financial Reporting Standards (IFRS), ultimately enhancing the willingness and preparedness of small and medium-sized enterprises (SMEs) in Vietnam to implement these standards effectively.
The readiness to implement IFRS for SMEs in Vietnam is significantly influenced by the attitudes of business administrators and managers, as well as their awareness of the associated challenges and benefits Additionally, factors such as costs and the professional qualifications of accounting practitioners play a crucial role in this process.
Decision usefulness theory is a foundational concept in accounting that underpins modern financial reporting standards and international accounting guidelines It asserts that the primary goal of financial reporting is to deliver relevant and useful information to users for effective economic decision-making Additionally, the theory highlights the importance of the cost-benefit trade-off, a crucial consideration in the development of accounting standards.
In 1954, Staubus introduced the concept of useful information theory, highlighting the limitations of financial reports in aiding users' economic decision-making At that time, users sought more relevant information from these reports, driven by the need to address the information asymmetry that existed between those who prepare financial statements and the users who rely on them.
The theory emphasizes the importance of delivering comprehensive and valuable information in financial statements (FSs) for users such as business owners and banks, enabling them to accurately assess a company's operational status To ensure the information's usefulness, FSs must be understandable, reliable, relevant, and comparable The primary objective of financial report preparation is to equip users with the necessary information for informed decision-making However, the utility of this information largely depends on the user's knowledge and capacity Therefore, financial report preparers and presenters must have a clear understanding of what constitutes useful information for users to prepare effective reports.
When evaluating the readiness of small and medium-sized enterprises (SMEs) in Vietnam to adopt IFRS for SMEs, it is essential to weigh the cost-benefit factors associated with transitioning from the current accounting standards Key considerations include the tangible benefits that IFRS for SMEs can provide to managers and whether compliance will incur significant costs and require substantial effort Additionally, the financial implications of changing the standards, such as training expenses and investment in infrastructure, must be taken into account Thus, the theory of useful information plays a critical role in assessing the feasibility of implementing IFRS for SMEs within Vietnam's SME sector.
In his research, author Ho Xuan Thuy utilized useful information theory to explore the relationship between the characteristics of small and medium-sized enterprises (SMEs) and suitable accounting standards for them He emphasized the importance of timely evaluating costs and benefits when selecting accounting policies, methods, and principles in accordance with IFRS for SMEs This theory has garnered attention from international researchers, such as Gray et al (1996), who highlighted the significance of identifying the audience and their needs for financial reporting information Additionally, Ploybut (2012) applied this theory to distinguish the information needs between SMEs and large companies, providing a foundation for understanding how the objectives of financial reporting impact the adoption of IFRS for SMEs in Vietnam.
F actors affecting the application of international accounting standards
small and medium-sized enterprises in HCMC
Ikahaimo et al (2008) affirm the IASB's perspective that international integration pressures, particularly due to the rise of international economic activities among SMEs, significantly influence the adoption of IFRS for SMEs Studies by Atik (2010) and Eierle & Haller (2009) further demonstrate that both export and import activities impact the application of IFRS for SMEs The findings indicate that while SMEs, regardless of their international engagement, generally support the adoption of IFRS for SMEs, those with extensive international operations and integration exhibit a greater need for compliance with IFRS standards.
To ensure effective financial management, enterprises must recruit qualified accountants with the necessary expertise and experience for their roles It is essential to provide training opportunities related to accounting, auditing, and tax declaration For businesses utilizing external accounting services, selecting a reputable provider with the appropriate professional credentials is crucial Additionally, all accounting personnel, including outsourced accountants, should continually enhance their professional knowledge and stay updated on legal regulations and accounting standards to maintain ethical practices in their work.
Uyar & Gũngỏrmũs (2013) highlighted that individuals trained in IFRS for SMEs possess significantly greater knowledge compared to their untrained counterparts, enhancing the effective application of these standards in businesses Furthermore, various studies, including those by Bunca et al (2012) and Buculescu and Stoica (2016), have examined the qualifications of accountants, often measured by their years of experience and professional credentials.
Through the above studies, it can be clearly seen that accountant qualifications are an important factor that needs to be considered and researched further Therefore, the authors hypothesize:
Hypothesis H2: Accounting staff qualifications have a positive impact on IFRS application for SMEs in HCMC
Parmond Chand (2015) highlights that for many Small and Medium Enterprises (SMEs), the costs of complying with accounting standards often exceed the potential benefits These costs encompass direct expenses related to the collection, storage, and retrieval of financial data, along with indirect costs that divert resources and management focus towards compliance efforts Furthermore, the additional financial burden of preparing, auditing, and distributing information may not be warranted, given the limited information needs of users Transitioning to new international accounting standards can also lead to social costs and the necessity for public financial support.
Bassemir's (2018) research shows that it is necessary to change information systems, training, and professional supplementation to develop accounting staff, while posing challenges for businesses.
Dervrimi Kaya and Maximilian Koch (2014) highlighted that the expenses associated with adhering to IFRS, such as employee training, arise from the mandatory information disclosure requirements rather than legal regulations Additionally, implementing IFRS for SMEs offers compliance advantages that outweigh the costs involved in its application.
Culture is a product of human evolution, distinguishing humans in the biological realm It plays a crucial role in the physical and mental development of individuals, enhancing the essence of humanity Karl Marx emphasized that culture is essential for cultivating human nature, aiming for both individual and societal perfection through the process of humanization.
Research by Kolsi and Zehri (2008), Stainbank (2014), Bikki et al (2016), and Samujh & Devi (2015) highlights the significant influence of cultural factors on the selection process for accounting applications The adoption of international accounting standards, particularly IFRS and IFRS for SMEs, is affected by these cultural dynamics Furthermore, Zaghal and Mhedhbi (2006) noted that countries with an Anglo-Saxon cultural background, especially those that are developing, tend to find it easier to implement IFRS.
Hoisted (1908) identified five key cultural factors: power distance, individualism, long-term orientation, masculinity, and uncertainty avoidance Countries that exhibit high levels of uncertainty avoidance and regulatory controls may struggle to swiftly implement IFRS international standards In contrast, nations characterized by flexibility, a growing accounting profession, and a commitment to transparency are more likely to successfully adopt IFRS.
Cultural factors significantly influence the adoption of international standards, particularly in language, which can create barriers to implementing IFRS for SMEs and impact the awareness of accounting professionals In developing countries, weak social norms and conservative ideologies hinder innovation, while a lack of experience and qualifications leads to resistance against converting to and applying IFRS.
2.4.5 The impact of domestic and foreign professional organizations
Developed accounting professional organizations play a crucial role in swiftly updating and implementing changes to newly issued IFRS, as noted by Chand and Patel (2008) These organizations possess the necessary resources and expertise to monitor the latest IFRS developments and disseminate this information within the accounting community Additionally, their involvement in the IFRS development process ensures that standards are tailored to the specific conditions of each country, ultimately facilitating effective IFRS application for businesses.
Research by Zeghal and Mhedhbi (2006) indicates a positive correlation between the development of accounting training systems and the effective application of IFRS in developing countries This suggests that enhancing accounting education is crucial for improving IFRS implementation Therefore, it is essential for countries to invest in robust accounting training systems to strengthen their capacity to apply IFRS effectively.
(2010) or Smujh and Devi (2015) emphasize the essential relationship between the education system, accounting training and IFRS application for SMEs.
The accounting community significantly influences the establishment of accounting standards in Anglo-Saxon countries like England, America, Australia, and New Zealand This influence is evident through the development of professional organizations that play a crucial role in creating technical standards According to Bananuka et al (2019), fostering accounting professional organizations is one of the most effective strategies to enhance IFRS adoption These organizations not only raise awareness about IFRS but also support businesses during the adoption process.
Professional organizations are crucial in advancing IFRS adoption in Vietnam, facilitating the country's integration into the global economy To enhance the capacity and efficiency of these organizations, it is essential to conduct seminars and training courses on IFRS for businesses, auditors, and other stakeholders Additionally, providing updated documentation and information on accounting and financial reporting standards, along with any changes to international and Vietnamese standards, is vital for continued progress.
2.4.6 Subjects and needs of using FS information
IFRS for SMEs defines users of FSs as including banks, suppliers, credit scoring agencies, customers and shareholders who do not participate in management (ACCA,
Research indicates that the user base of financial statements (FSs) is more limited and varied than previously thought, with differing levels of importance assigned to FSs by each user group An initial study involving boards of directors and auditors from small companies in Ireland and the UK highlighted the critical role of FSs for SMEs in informing business directors about operational efficiency and management decisions Additionally, authorities utilize FSs for tax assessment, while banks and creditors rely on them to evaluate corporate debt repayment capability In contrast, shareholders, suppliers, and other stakeholders place less significance on FSs for their decision-making processes.
A study by MSc Nguyen Bich Ngoc (2018) reveals that banks (35.4%) and tax authorities (32.8%) are the primary users of financial statements (FSs) from SMEs, while business managers, investors, and employees are less significant users Utilizing a 1-5 Likert scale, the research indicates that accountants frequently provide FSs to banks for loan applications (average frequency: 3.92), but FSs are seldom used for trade credit applications (2.26) or bidding support (2.48) This aligns with previous studies by Sian and Roberts (2008) and Dang Duc Son et al (2006), which also identified banks as key users of SME FSs Furthermore, the majority of respondents indicated that they prepare FSs primarily to meet tax obligations (average value: 3.86), corroborating findings from Sulthirat (2012) that 79.1% of accountants in Thailand prepare FSs for external stakeholders, particularly tax authorities Similar conclusions were drawn in Germany, where most SMEs acknowledged the importance of FSs for tax calculations (Haller & Eierle, 2007).
RESEARCH METHODS
R esearch framework and process
The application ofIFRS for small and medium enterprises in Ho Chi Minh City
- Factors affecting the application of IFRS for SMEs in small and medium enterprises in Ho Chi Minh City
- Measure the influence of factors on the application of IFRS for SMEs in small and medium enterprises in Ho Chi Minh City
- Research overview, theoretical basis on factors affecting the application of IFRS for SMEs in small and medium enterprises in Ho Chi Minh City
- Factors affecting the application of IFRS for SMEs in small and medium enterprises
- Measure the influence of factors on the application ofIFRS for SMEs in small and medium enterprises
- Survey via questionnahe to measure the impact of factors on the application of
IFRS for SMEs in small and medium enterprises
- Test models and research hypotheses
- Regiession model correlating between the application of IFRS for SMEs in small and medium enterprises with related factors.
(Source: Research and synthesis author)
(Source: Research and synthesis author)
R esearch model , measurement scale and hypotheses
Pressure factor for international integration
Research by Ikahaimo et al (2008), Eierle and Haller (2009), Atik (2010), Albu et al (2013), and Ho Xuan Thuy (2016) indicates that international integration is strengthening economies, particularly through increased international economic activities such as exports, imports, and capital investments by SMEs This trend underscores the necessity for implementing international financial reporting standards (IFRS) for SMEs and highlights the implications of adopting these standards Consequently, the authors propose the first hypothesis.
Hypothesis Hl: International integration pressure has a positive impact on the application of international financial standards for SMEs in HCMC.
Research indicates that a shortage of qualified accountants significantly hinders the implementation of IFRS for SMEs in Turkey (Uyar et al., 2013) Studies by Zakari (2014), Samujh & Devi (2015), and Perera & Chand (2015) further demonstrate that the qualifications of accountants play a crucial role in the effective application of these standards This lack of readiness among businesses to adopt IFRS for SMEs can be attributed to insufficiently qualified accounting professionals Consequently, the authors investigated how accountant qualifications influence the application of IFRS for SMEs, guided by the theory of planned behavior, leading to the formulation of a hypothesis concerning this qualification factor.
Hypothesis H2: Higher qualifications of accounting staff have a positive impact on applying IFRS for SMEs in HCMC increased.
The complexity of accounting standards often leads to a discrepancy between compliance costs and the benefits derived from adhering to specific financial reporting standards, as noted by Javis & Collis (2003) Di Pietra et al (2008) further emphasized that the consideration of IFRS application for SMEs in developed countries is primarily based on an analysis of the benefits gained versus the costs incurred The IFRS for SMEs, issued by the Council of IFRS, addresses these concerns (Litjens et al., 2012; Albu et al.).
2013), (Chand & al., 2015) show that preparers of FSs consider very carefully the relationship between benefits and costs when businesses Apply IFRS to SMEs From there, leading to the fourth hypothesis:
Hypothesis H3: Cost/Benefits have a positive impact on the application of IFRS for SMEs in HCMC.
(Nobes, 1998) noted that countries influenced by the same cultural values are likely to apply the same accounting criteria (Chamisa, 2000) and (Zeghal & Mhedhbi,
Research indicates that developed countries with an Anglo-Saxon cultural background are more inclined to adopt International Financial Reporting Standards (IFRS) This suggests that nations sharing this cultural trait may find it easier to implement IFRS criteria Cultural factors, such as language barriers and the awareness of accountants, significantly impact the adoption of international standards, particularly in developing countries where social standards are often weak These nations may exhibit a conservative ideology resistant to innovation, coupled with a lack of experience and qualifications, hindering their readiness for IFRS transformation Additionally, societies characterized by low uncertainty avoidance are less likely to have accounting systems heavily influenced by regulatory requirements, making them more receptive to IFRS adoption.
Hypothesis H4: Culture has a positive impact on the application of IFRS for SMEs in HCMC.
Factor The impact of domestic and foreign professional organizations
Research by Gray (1991) and Yap et al (1992) highlights the significant influence of professional associations on the implementation of accounting information systems in small and medium-sized enterprises (SMEs) Their findings indicate that the support provided by these professional organizations plays a crucial role in enhancing the success of accounting information systems within businesses.
In 2010, it was emphasized that for the effective implementation of IFRS for SMEs, countries must develop robust accounting education and training systems through professional organizations This conclusion leads to the formulation of the sixth hypothesis.
Hypothesis H5: The impact of domestic and foreign professional organizations has a positive impact on the application of IFRS for SMEs in HCMC.
Factor Objects and needs for using FS information
Banks are a crucial source of capital for SMEs, often requiring financial statement information to accurately assess the business's financial health for securing debt and interest (Mazars, 2008; Albu et al., 2010) Given their limited resources, the primary users of SME information include business owners, banks, and financial institutions (Dang Duc Son, 2011) Additionally, transparency in business information is essential for attracting international investment, highlighting the importance of adhering to IFRS standards (Ern et al., 2016) Based on these findings and the principles of useful information theory, the seventh hypothesis is established.
Hypothesis H6: Subjects and needs for using FS information of SMEs have a positive impact on the application of IFRS for SMEs in HCMC.
Research by Chamisa (2000), Evans et al (2005), Sian & Roberts (2006), Albu (2010), Albu et al (2011), Fekete et al (2011), and Ploubut (2012) highlights the significant influence of legal system factors on the implementation of IFRS for SMEs across various countries The consensus among these authors is that both accounting practices and the adoption of IFRS for SMEs are affected by the prevailing legal frameworks and regulatory environments The authors propose an eighth hypothesis addressing this relationship.
Hypothesis H7: The legal system has a positive impact on IFRS application for SMEs in HCMC.
Hypothesis Content Signs of expeclat ion
Hl International integration pressure has a positive impact on the application of international financial standards for SMEs in HCMC
H2 Higher qualifications of accounting staff have a positive impact on applying IFRS for SMEs in HCMC increased
(2013) Zakari (2014) Samujh & Devi (2015) Chand & cộng sự (2015)
H3 Cost/Benefits have a positive impact on the application of IFRS for SMEs in HCMC
H4 Culture has a positive impact on the application of IFRS for SMEs in HCMC
Stainbank (2014) Samujh & Devi (2015) Bikki, Alessandra, Francesca (2016)
H5 The impact of domestic and foreign professional organizations has a positive impact on the application of IFRS for SMEs in HCMC
(Source: Research and synthesis author)
H6 Subjects and needs for using FS information of SMEs have a positive impact on the application of IFRS for SMEs in HCMC
Albu & cộng sự (2010) Dang Duc Son (2011) Ern & cộng sự (2016)
H7 The legal system has a positive impact on IFRS application for SMEs in Ho Chi Minh City
Võ Vãn Nhị & Trằn Thị Thanh Hải (2017)
The author has consulted the documents of research articles related to his topic and synthesized the influencing factors and proposed a research model.
APPLYING INTERNATIONAL ACCOUNTING STANDARDS (IFRS FOR SMEs)
(Source: Research and synthesis author)
In reviewing previous studies on the factors influencing the application of IFRS for SMEs globally, particularly drawing from the research of Ikahaimo et al (2008), Eierle & Haller (2009), Atik (2010), Albu et al (2013), and Ho Xuan Thuy (2016), the author established a scale for the variable, which comprises four observed variables coded from PI1 to PI4.
Table 3.2: Variables observing Pressure for International Integration factors
1 Businesses with import activities need to apply IFRS to SMEs
2 SMEs borrowing from banks or financial institutions abroad need to apply IFRS to SMEs to make information transparent on FSs
3 SMEs easily attract foreign capital when applying IFRS to SMEs
4 SMEs have international competitors that increase the need to apply IFRS to SMEs
(Source: Research and synthesis author)
'’Qualification of accounting staff” scale
(Uyar & al., 2013), (Zakari, 2014), (Samujh & Devi, 2015) and (Perera & Chand,
In their 2015 study, the authors examined how the qualifications of accounting staff influence the application of IFRS to SMEs Building on previous research, they identified a scale for measuring accounting staff qualifications, which comprises four observed variables, coded as QAS1 through QAS4.
Table 3.3: Variables observing Qualification of accounting staff factors
1 The professional skills of accountants influence the application of IFRS to SMEs
2 Accountants have a spirit of learning and innovating according to the general world trend of accounting ỌAS2
(Source: Research and synthesis author)
3 The level of understanding of accounting staff in businesses about IFRS for SMEs affects the application of IFRS for SMEs in Vietnam
4 The professional experience ofaccountants affects the application of IFRS for SMEs in Vietnam
■*Cost/Ben efits' ’ sea Ie
(Javis & Collis, 2003), (Di Pietra & al., 2008), (Litjens & al., 2012), (Albu & al.,
The study conducted by Chand et al (2013) and Chand et al (2015) examines the cost/benefit factors influencing the application of IFRS for SMEs Building on these previous studies, the authors identified a Cost/Benefit variable scale that comprises three observed variables, coded as CB1, CB2, and CB3.
Table 3.4: Variables observing Cost/benefit factors
1 The costs ofIFRS compliance for SMEs are consistent with the benefits provided by the adoption of IFRS for SMEs
2 The information required by IFRS for SMEs is not available or is only available at high cost
3 It is necessary’ to eliminate the costs of converting to IFRS for SMEs for SMEs that are encouraged
(Source: Research and synthesis author)
Research by Shaker and Niswander (1995) examined the impact of culture on the international accounting system, testing Gray's theory which suggests that cultural apprehension towards difficulties and risks complicates the adoption of IFRS Building on these findings, the author established a culture variable scale comprising four observed variables, coded CT1 to CT4.
Table 3.5: Variables observing Culture factors
(Source: Research and synthesis author) symbol
1 Differences in language make it difficult to read and understand IFRS for SMEs
2 Vietnam’s accounting system emphasizes prudence, requires compliance with regulations, and limits judgmental issues
3 The Vietnamese culture ofavoiding uncertainty and risks indirectly affects and has an important impact on the application of IFRS for SMEs
4 rhe conservative ideology and reluctance to innovate ofaccountants hinders the application of IFRS for SMEs in Vietnam
"The impact of domestic andforeign professional organizations " scale
The authors built upon the research frameworks established by Gray (1991) and Yap et al (1992) regarding the factors influencing the implementation of accounting information systems in SMEs, while also incorporating insights from Albu et al (2010) They identified and refined the scale for assessing the impact of domestic and foreign professional organizations on the adoption of IFRS for SMEs in Ho Chi Minh City, which includes three observed variables coded as PO1, PO2, and PO3.
Table 3.6: Variables observing The impact of domestic and foreign professional organizations factors
1 Professional organizations play an important role in drafting and promulgating accounting standards and regimes for
2 Career organizations organize training courses to update IFRS knowledge for SMEs
(Source: Research and synthesis author)
3 Professional organizations arc active in promoting and implementing IFRS for SMEs in Vietnam
"Subjects and needsfar using FS information" scale
(Mazars, 2008), (Albu & al., 2010), (Dang Duc Son, 2011) and (Ho Xuan Thuy,
In their 2016 research, the authors examined how the Audience factor influences the utilization of financial statement (FS) information, specifically regarding the application of International Financial Reporting Standards (IFRS) for small and medium-sized enterprises (SMEs) Building on previous studies, they identified and defined a scale for the variable Objects, emphasizing the necessity of using FS information, which encompasses five observed variables coded from UFR1 to UFR5.
Table 3.7: Variables observing Objects and needed to use FS information factors
1 Business owners arc concerned about the quality of
FSs, so the need to apply IFRS to SMEs also increases to increase the quality of FSs
2 The unit's FSs serve internal management requirements in the enterprise
3 Banks often require the provision of FSs as well as detailed and transparent accounting information when reviewing credit and loans, thereby creating motivation to apply IFRS to SMEs
4 Investors often require the provision of FSs as well as detailed and transparent accounting information when making investment decisions, thereby creating motivation to apply IFRS to SMEs
5 State management agencies, especially tax authorities, are the main users of the unit's FSs
(Source: Research and synthesis author)
(Chamisa, 2000), (Evans et al., 2005), (Sian & Roberts, 2006), (Albu, 2010),(Albu Ct al., 2011), (Fekete Ct al., 2011) and (Ploubut, 2012) and (Ho Xuan Thuy, 2016)
The author analyzed the implementation of IFRS for SMEs across various countries and identified a Legal System variable scale consisting of five observed variables, coded from LSI to LS5.
Table 3.8: Variables observing Legal System factors
1 Regulations and circulars guiding accounting for
SMEs in Vietnam in accordance with IFRS for
2 Detailed regulations and compliance requirements of Vietnam Economic Community affect the application of IFRS for SMEs
3 Vietnam still lacks some accounting standards corresponding to IFRS for SMEs and regulatory documents to guide IFRS for SMEs
4 Tax regulations have a major impact on the application of IFRS to SMEs
5 National accounting standards are now consistent with IFRS for SMEs
(Source: Research and synthesis author)
"The application of IFRSfor small and medium-sized enterprises ” scale
Table 3.9: Variables observing The application of IFRS for small and medium sized enterprises factors
1 Selectively apply the contents of IFRS for SMEs 1A1 Albu(2010)
Võ Vãn Nhị & Trần Thị Thanh Hài
2 Apply a step-by-step roadmap from selection to full adoption of IFRS for SMEs.
3 The application of IFRS for SMEs should be done voluntarily SMEs are allowed to choose whether or not to apply IFRS.
Table 3.10: Summary table of official research scales
4 It is mandatory to apply IFRS for SMEs to certain groups of SMEs
5 Converging Vietnamese accounting standards with
1 Businesses with import activities need to apply IFRS to SMEs
2 SMEs borrowing from banks or financial institutions abroad need to apply IFRS to SMEs to make information transparent on FSs
3 SMEs easily attract foreign capital when applying IFRS to SMEs
4 SMEs have international competitors that increase the need to apply IFRS to SMEs
1 The professional skills of accountants influence the application of IFRS to SMEs
2 Accountants have a spirit of learning and innovating according to the general world trend of accounting
3 The level of understanding of accounting staff in businesses about IFRS for SMEs affects the application of IFRS for SMEs in Vietnam
4 The professional experience of accountants affects the application of IFRS for SMEs in Vietnam
1 The costs of IFRS compliance for SMEs arc consistent with the benefits provided by the adoption of IFRS for SMEs
2 The information required by IFRS for
SMEs is not available or is only available al high cost
3 It is necessary to eliminate the costs of converting to IFRS for SMEs for SMEs that arc encouraged
1 Differences in language make it difficult to read and understand IFRS for SMEs
2 Vietnam's CT2 emphasizes prudence, requires compliance with regulations, and limits judgmental issues
3 The Vietnamese culture of avoiding uncertainly and risks indirectly affects and has an important impact on the application of IFRS for SMEs
4 The conservative ideology and reluctance to innovate of accountants hinders the application of IFRS for SMEs in Vietnam
The impact of domestic and foreign professional organizations
1 Professional organizations play an important role in drafting and promulgating accounting standards and regimes for SMEs in Vietnam
2 Career organizations organize training courses to update IFRS knowledge for SMEs
3 Professional organizations are active in promoting and implementing
IFRS for SMEs in Vietnam
Subjects and needs for using FS information
1 Business owners are concerned about the quality of FSs, so the need to apply IFRS to SMEs also increases to increase the quality of FSs
2 The unit’s FSs serve internal management requirements in the enterprise
3 Banks often require the provision of FSs as well as detailed and transparent accounting information when reviewing credit and loans, thereby creating motivation to apply IFRS to SMEs
4 Investors often require the provision of FSs as well as detailed and transparent accounting information when making investment decisions, thereby creating motivation to apply IFRS to SMEs
5 State management agencies, especially tax authorities, are
UFR5 the main users of the unit's FSs
1 Regulations and circulars guiding accounting for SMEs in Vietnam in accordance with IFRS for SMEs
2 Detailed regulations and compliance requirements of Vietnam Economic Community affect the application of IFRS for SMEs
3 Vietnam still lacks some accounting standards corresponding to IFRS for SMEs and regulatory documents to guide IFRS for SMEs
4 Tax regulations have a major impact on the application of IFRS to SMEs
5 National accounting standards are now consistent with IFRS for SMEs
The application of IFRS for small andmedium-sized enterprises
1 Selectively apply the contents of IFRS for SMEs
Võ Văn Nhị & Trần Thị Thanh Hái
2 Apply a step-by-step roadmap from selection to full
IA2 adoption of IFRS for SMEs.
IFRS for SMEs should be done voluntarily SMEs are allowed to choose whether or not to apply IFRS.
4 It is mandatory to apply IFRS for SMEs to certain groups of SMEs
Vietnamese accounting standards with IFRS for SMES
(Source: Research and synthesis author)
R esearch methods
The author employed a convenience sampling method, enabling the selection of suitable subjects for the study, although this may compromise the representativeness of the results Data were gathered from randomly selected individuals in accounting, auditing, financial economics, and teaching To ensure the accuracy and reliability of the research findings, a sufficiently large sample size is essential, adhering to established scientific standards As noted by Hair et al (1998), the minimum sample size for Exploratory Factor Analysis (EFA) should be n ≥ 5*k, where k represents the number of observed variables Additionally, Tabachnick and Fidell (2007) state that for Multiple Linear Regression (MLR), the sample size should be calculated using n > 50 + 8p, with p being the number of independent variables Therefore, with 39 observed variables in this study, the required minimum sample size is calculated as 50 + 8*8, ensuring robust research outcomes.
Questionnaire survey method: Based on the study's minimum sample of 114, the authors collected survey data for subjects in two forms: sending and receiving responses via email and live broadcast.
Send and receive feedback via email
(Source: Synthesis author) Thus, the actual collected survey data included in the study was 189 samples.
3.3.3 Data analysis and processing process
Data collected from questionnaires will undergo thorough verification to remove any incorrect responses prior to entry The data will be analyzed using SPSS to conduct descriptive statistics and assess the reliability of the scale through Cronbach's Alpha coefficient Additionally, exploratory factor analysis and multiple regression analysis will be utilized to determine the factors that significantly influence the application of IFRS for SMEs in Ho Chi Minh City.
The author utilized a descriptive statistical method to develop a questionnaire for surveying professionals in accounting and auditing, particularly within small and medium-sized enterprises This process involved integrating feedback from experts and the research methodology Following the survey, the author analyzed the data to enhance the reliability of the research findings.
The Cronbach's Alpha testing method is used to evaluate the internal consistency reliability of a scale, with a coefficient ranging from 0.8 to 1.0 indicating excellent reliability A coefficient between 0.7 and 0.8 is considered good, while a value above 0.6 is deemed acceptable Additionally, the variable-total correlation coefficient should be equal to or greater than 0.3, as outlined by Nunnally and Bernstein (1994) A Cronbach’s Alpha coefficient exceeding 0.95 suggests that multiple variables may be measuring the same research concept, resulting in measurement overlap (Nguyen Dinh Tho, 2014).
Exploratory Factor Analysis (EFA) is a statistical method designed to assess two key types of scale value: convergent and discriminant validity According to Hair et al (1998), EFA simplifies complex datasets with numerous interrelated variables into a more manageable set of factors, while still retaining significant information from the original data.
Necessary background for EFA analysis:
The Kaiser-Meyer-Olkin (KMO) index is essential for assessing the suitability of factor analysis, with acceptable values ranging from 0.5 to 1 A KMO score closer to 1 indicates that the factor analysis is appropriate for the given data (Hair et al., 1998).
Bartlett's test is utilized to assess the linear relationships among observed variables within a factor A statistically significant result (p < 0.05) indicates that the observed variables are correlated with one another within each factor (Hoang Trong and Chu Nguyen Mong Ngoc, 2008).
Extracted variance: represents the percentage of variation of the representative factor explained by the factors (Hoang Trong and Chu Nguyen Mong Ngoc, 2008) The accepted standard is a variance greater than 50%.
The linear regression analysis method is utilized to identify the influencing factors and their varying levels of impact on the application of IFRS for SMEs in Ho Chi Minh City The standardized regression coefficient, known as the Beta coefficient, facilitates direct comparisons of the influence exerted by independent variables on the dependent variable To assess the significance of the Beta coefficient, the "t" statistic is employed; a significance level of less than 0.05 indicates that the Beta coefficient is statistically significant.
The Pearson correlation analysis method employs the Bartlett test to assess the correlation between observed variables within a scale A significance level (Sig.) of less than 0.05 in the Bartlett test indicates a significant Pearson correlation, represented by the coefficient r, which quantifies the strength of the linear relationship between the variables A coefficient value closer to 1 in absolute terms signifies a stronger linear correlation between the variables (Hoang Trong and Chu Nguyen Mong Ngoc, 2008).
In Chapter 3, the authors outlined the research methodology, including the model and scale utilized in the study They developed a survey questionnaire aimed at gathering data from businesses to identify factors influencing the adoption of IFRS among SMEs in Ho Chi Minh City Following data collection and processing, the information will be analyzed using SPSS 20 software to assess model suitability and remove any irrelevant variables The findings of this research will be detailed in the subsequent chapter.