Abstract
In 2014, all Swedish small private firms (legal entities) were required to choose between an external reporting-oriented standard (K3) based on IFRS for SMEs (2009 version) and a simplified reporting standard designed to minimize tax-accounting differences (K2). Using this shock to the reporting environment, we study firms' reporting choices in the context of competing tax and external reporting preferences. We provide direct evidence of the role these preferences play in firm-level reporting and, in several ways, highlight the importance for such firms to be able to report internally generated intangible assets. Our results also suggest that these reporting choices are oriented towards stakeholders other than credit providers. We present important insights for standard setters and regulators reviewing the reporting requirements applicable to private firms.