In July 2002, the Financial Reporting Council (FRC) announced that the Australian Accounting Standards Board (AASB) would fully adopt Australian equivalents to International Financial Reporting Standards (AIFRS) from 1 January 2005. This would affect all reporting entities, including listed and unlisted entities, both private and public. This research investigates the impact of AIFRS on SMEs in 2005/06, specifically the factors affecting their readiness to adopt AIFRS, including: (1) the translation plan of and obstacles to adoption, (2) communication with stakeholders, (3) amount of resources required, (4) AIFRS information sources, (5) potential impacts of AIFRS on SMEs, (6) overall readiness, and (7) the advantages and disadvantages of AIFRS to SMEs. Furthermore perspectives were provided by two professional accounting bodies. Results through a web based survey indicate that several SMEs were not ready to adopt AIFRS due to an underestimation of their complexity, lack of perceived benefits and the time and resource constraints involved. The study concludes that regulators are justified in re-considering the requirements of AIFRS in relation to SME''s.