DOI: https://doi.org/10.36719/2663-4619/126/73-79
Kanan Asgerov
Khazar University
Master's student
https://orcid.org/0009-0009-1492-6465
kanan.asgerov18@gmail.com
Standardization of Financial Reporting in SMEs in Azerbaijan:
Current Problems and International Experience
Abstract
Small and medium-sized enterprises (SMEs) dominate Azerbaijan’s business landscape in terms of the number of entities, yet the quality and comparability of their financial statements remain uneven. Financial reporting standardization is a key instrument for improving transparency, strengthening investor and lender confidence, and enhancing tax administration and financial discipline. Recent regulatory developments, including steps to institutionalize electronic accounting through the “e-mühasibat” information system, have increased the practical relevance of the standardization agenda. However, SME reporting still faces persistent barriers: excessive linkage of accounting to tax rules, shortage of qualified accountants, uneven documentation practices, methodological gaps between national approaches and IFRS for SMEs, and the cost burden of transition and training. The paper justifies the topic’s importance using available official indicators of SMEs’ role in the economy (e.g., SMEs’ share in value added reaching 18% in 2023) and prioritizes the main constraints affecting implementation. It also reviews international experience of IFRS for SMEs adoption in developing countries, taking into account the updated third edition issued in February 2025 and effective from 1 January 2027. The paper concludes with policy-oriented recommendations for Azerbaijan, emphasizing a phased transition model, standardized reporting templates, capacity building, and structured reconciliations between financial and tax reporting to reduce the dual-reporting burden.
Keywords: SMEs, financial reporting, standardization, national standards, IFRS for SMEs, transparency, tax alignment, audit, digitalization