In the Republic of Croatia, there are two basic financial reporting standards used in companies, and those are: CFRS-Croatian Financial Reporting Standards and IFRS-International Financial Reporting Standards. The difference between these two standards is that International Financial Reporting Standards are used by large companies and companies whose securities are listed on the stock exchange, while Croatian Financial Reporting Standards are used by small and mediumsized companies. In 2007, the International Accounting Standards Board (IASB) published draft International Financial Reporting Standards for small and medium-sized enterprises on its official website. The draft is first given to the public for consideration, to those who should apply it in their business in the future, and as such is subject to change, if necessary. In 2009, the Committee on International Accounting Standards published the final version of the mentioned draft, and so they created the International Financial Reporting Standards for small and medium-sized enterprises. They represent a simplified version of the current IFRS for large companies. On the other hand, CFRS standards are mandatory for all SMEs from the day of their establishment together with accounting principles and legal regulations. All these regulations are important for the functioning of the company, and in order to implement it as successfully as possible, it is necessary to harmonize the financial reporting process. This is achieved by compiling and publishing financial statements. The paper will explain the application of these two financial statement standards and compare their advantages and disadvantages.