Alternation Special Edition 4 (2011) 69 – 102 ISSN 1023-1757 69 The Threshold, Burden and Usefulness of Financial Reporting for Small and Medium-Sized Entities in KwaZulu-Natal Lesley Stainbank Mercy Tafuh Abstract A subject of debate by standard setters is whether there should be one set of standards for all entities or different standards for different entities (i.e. differential reporting). The aim of this exploratory study is to examine the impact of International Financial Reporting Standards (IFRSs) on Small and Medium-sized Entities (SMEs) by reporting the results of a questionnaire survey which ascertained the perspectives of users of SMEs’ financial statements and accounting practitioners in KwaZulu-Natal in three areas: firstly, the threshold (or cut-off) used in the definition of an SME, secondly, whether compliance with IFRSs places a burden on SMEs, and thirdly, the usefulness of SMEs’ financial statements to their users. This study provides evidence that the respondents to this survey were of the opinion that quantitative size criteria are an appropriate element in determining the threshold for differential reporting, that the costs of preparing financial statements by SMEs using IFRSs outweigh any benefits and that users are of the opinion that the financial statements of SMEs are useful mainly to the South African Revenue Service, followed by financial institutions. Keywords: Differential reporting, SMEs, IFRSs, cost/ benefit constraint.