Abstract
M.Comm
The international financial reporting arena has undergone considerable changes in
recent years. The recognition, measurement, presentation and disclosure
requirements have increased significantly over the past two decades. Standard
setters around the world have justified the more stringent reporting requirements on
the grounds of the changes in the international business and economic landscapes
as a result of globalisation. These increased financial reporting requirements placed
a tremendous burden on Small and Medium-sized Entities (SMEs). As a result, the
need for differential reporting has been identified.
The notion of differential reporting acknowledges that the users of the financial
statements of SMEs have different needs compared to those of public companies.
Stakeholders and users of financial statements of SMEs are generally in a position to
acquire information additional to that disclosed in the financial statements. Financial
information presented in the financial statements is therefore not required to be
exhaustive. The users of public company financial statements on the other hand,
generally do not have access to any additional information, other than that presented
in the financial statements. The information required to be presented in the financial
statements, must therefore be extensive in order to allow the user to make informed
decisions based on the information.
Various countries around the world have responded to this cry for differential
reporting, and standard setters have adopted differential reporting in one form or the
other. This study discusses the need for differential reporting and outlines the
developments of differential reporting internationally and in South Africa, by means of
a literature review.