The object of research is the process of forming an effective accounting policy for small businesses in Ukraine in the context of the transition to the International Financial Reporting Standard (IFRS) to stimulate the development of the small business sector on investment and innovation principles. One of the biggest problems of reforming in Ukraine is the predominance of the fiscal orientation in regulating the activities of small businesses over the incentive function. The accounting policy of a small business entity should be formed in such a way as to create conditions for increasing its competitiveness on investment and innovation principles.A comparison of general regulatory standards is made to determine the elements of the accounting policies of small businesses enterprises (SBE) under the IFRS and in the Ukrainian legislation. The experience of economically developed countries in regulating the principles, procedures and methods of accounting in the formation of the accounting policies of small and medium-sized business entities (SMEs), which ensure the development of the small business sector on investment and innovation principles, has been determined. The directions of improvement of the Ukrainian model of formation of accounting policies for the SBE, taking into account investment and innovation aspects, are proposed.In the course of the study, general scientific and specialized research methods were used. As well as approaches to modeling the process of forming the accounting policy of a small business entity in the transition with international financial reporting standards. The aspects that may affect the financial results of the activity of a small business entity for ensuring development on investment and innovation principles are identified. To do this, it is necessary to take into account procedural, organizational and technical, tax, analytical, managerial and international aspects.This ensures conditions for the formation of effective accounting policies. The accounting policy, taking into account the above aspects, will help optimize the financial results of the economic activities of the small business entity and will increase the effectiveness of management decisions. And also will ensure the achievement of the best options for the functioning of financial and management accounting.