The Impact of Global Financial Crisis on International Financial Reporting Standards - Research Proposal Example

 The impact of global financial crisis on International Financial Reporting Standards (IFRS) and financial accounting Abstract The purpose of this paper is to develop a research proposal for the selected research topic “The impact of global financial crisis on International Financial Reporting Standards (IFRS) and financial accounting”. The purpose of this research is to focus on the effects of global economic recession on international accounting standards by identifying major areas of accounting that has been criticised for various reasons. The analysis to be presented in the report will be examined for its implications for Saudi based companies that are required to prepare and present their financial reports using IFRS. The research proposal encompasses background to the proposed research, its objectives and research aim that the researcher will achieve at the completion of the research report. It also includes brief literature review relevant to the subject topic. Moreover, the proposed research methodology that is based on qualitative research along with its limitations is provided. Finally, the research proposal also provides ethical considerations that the researcher has fully understood and acknowledged as a part of conducting such research. Table of Contents Abstract 1 Title 3 Introduction 3 Objective 4 Project Aim 4 Research Questions 5 Literature Review 5 Research Methodology 7 Proposed Research Methodology 8 Research Methodology Limitations 8 Ethics Considerations 9 Disseminations 9 Conclusion 10 References 11 Title The impact of global financial crisis on International Financial Reporting Standards (IFRS) and financial accounting Introduction Accounting profession has its history that could date back to many centuries. Over the years the accounting profession has evolved through a learning process as economic conditions and ways of doing businesses have drastically changed where new transactions are introduced and the existing rules and regulations are considered insufficient to meet the requirements of a transparent and complete disclosure of companies’ financial positions. All countries have their own accounting regulatory bodies that have either formulated their own standards and practices for businesses to follow or they have simply adopted accounting standards and guidelines developed by one of the well established and regulated frameworks. These standards and guidelines are required to be fully complied with at all times and auditors, and audit committees within organizations are required to ensure that no discrepancies take place. However, from time to time those involved in the global corporate sector are criticized for their deliberate manipulations of firms’ accounts and misuse of accounting standards to present a healthier image of the business. This argument is often raised at times of when recession hits economies as businesses become more susceptible of managing their earnings falsely to attract or retain investment and shareholders turn towards accountants and auditors to seek their assurance regarding businesses they invest in (Shih & Lin, 2002). It therefore became an utmost urgency for accounting regulators to come up with a single set of accounting and financial reporting standards that would close windows for manipulation and remove discrepancies between accounting standards of different regulatory bodies. However, despite of this transition the international accounting standards seem to be inefficient in certain areas to avoid major corporate problems related to recognition, treatment and disclosure of assets and liabilities by companies (IASCF, 2008). Due to the pressures of the economic recession and surge of accounting issues, those appear not to be covered fully by the present standards, the process of discussions and amendments of these standards continue at different platforms that will be form the basis of discussion in the proposed research. Objective The objective of the proposed research is to identify the reasons for the current global recession and its impact on International Financial Reporting Standards (IFRS) and financial accounting. Project Aim The objective set out for the proposed research will be well served by establishing the aim of the proposed research as to identify and establish a relationship between global recession and financial reporting that has its implications for regulatory bodies responsible for setting international financial reporting standards. The impact of global recession on accounting standards will be assessed for any changes that have been proposed by regulatory bodies and those associated with the profession as a result of lessons learnt from the current financial crisis. The proposed research is a unique one as it focuses on the current situation of financial accounting and reporting in Saudi Arabia. Since there has not been any significant research that has its focus on the impact of the global recession on IFRS and its consequent implications on financial accounting and reporting by companies in Saudi Arabia, the proposed will be a vital piece of work for those who wish to understand the implications of the global financial crisis and IFRS on Saudi companies as they are responsible for reporting their financials using IFRS. Research Questions The objective of the proposed research can be achieved by finding suitable answers through research for the following research questions: What are the reasons behind the global recession and its implications for financial reporting of certain assets and liabilities? What is the relationship of international financial reporting standards and contemporary issues created by the current economic crisis? What are the arguments against the international financial reporting standards insufficiency and incapability to overcome the weakness of financial reporting? What are the implications of proposed changes in international financial reporting standards on Saudi companies listed on its Tadawul Stock Exchange? Literature Review The efforts for international accounting standards could date back to 1960s when a group of the European countries converge on their efforts to develop a single set of standards that would be applicable in the EU. In this respect, the IASB’s predecessor IASC formulated a series of acccounting standards that were later referred to IAS after 2000 as the IASB replaced IASC (IASCF, 2007). The objective set out by IASB is to converge all member countries on a single set of accounting standards and assure that enough guidance is provided to them for smooth transition from their exisiting standards to new ones. A major step in this regard has been that of FASB and IASB joining hands to remove discrepancies between US GAAP and IFRS. The differences in the conceptual frameworks has been a major hurdle in the process and both regulatory bodies despite of almost a decade collaboration have not been able to resolve all issues (FASB, 2002). This process has raised numerous accounting issues that remain unresolved and the IASB is expected to bring forth a new set of IFRSs that are aimed at addressing areas that the IASs did not address these issues adequately (IASB, 2008). The convergence process has led to new IFRS such as fair value accounting of financial instruments that is strongly debated to create confusion and mistreatment of financial instruments. Fair value accounting that requires financial assets and liabilities to be mark to market. This concept was viewed as a reason for leading major economies into recession as in tougher economic conditions it is not possible to find a market for high quality assets. Fair value accounting is therefore viewed as one of the major implications of the global recession that needs to be addressed by accounting regulators (Sukhraj, 2008). Similarly, with economic recession there are increased risks of irregularities by firms as managers reporting financials under different accounting frameworks tend to misuse the opportunities they may exist in different interpretation of accounting standards and policies. Companies report their financials by changing their valuation methods of assets or reporting of earnings and expenses. Reporting of earnings is yet another area that still remains unresolved between FASB and IASB. They have agreed upon contract based reporting of earnings however there are still areas that remain pending to be resolved. The global economic recession has its implications for the accounting profession and the IASB needs to reconsider its approach for developing new accounting standards and also the content of existing accounting standards to meet the financial accounting and reporting requirements. Research Methodology Phenomenological Paradigm is based on qualitative approach that has its more common applications where researches pertaining to investigation and evaluation of a particular human or social problem are carried out. It does not use statistical techniques for evaluation of data and relies on the researcher’s own skills and knowledge to interpret data and provide more descriptive and subjective analysis (Ary, Jacobs, Razavieh, & Sorensen, 2009).  On the other hand, Positive Paradigm is based on quantitative research that involves collection of numerical data and then applies different statistical models and techniques to analyse the data. This methodology is based on numbers that are evaluated using statistical techniques based on the theory and hypothesis generation using different variable models. The results from this approach are numerical and less descriptive (Ary, Jacobs, Razavieh, & Sorensen, 2009). Furthermore, two approaches including deductive research and inductive research needs to be considered as deductive approach provides detail analysis of a specific research objective or hypothesis by setting up specific project aim and conducting a research to either accept or reject hypothesis and present generalize conclusions. While on the other hand inductive research uses opposite approach that is based on theoretical framework and is specific to a specific case and the results are generalized for a larger group (Taylor, Gautam, & Ghoshal, 2006). There are two methods for collecting data for a research including primary research and secondary research. Primary research comprises of primary data collection techniques such as survey questionnaire, interview, focus group, observation etc. (Trochim, 2006). While on the other hand secondary sources consists of previously published or presented literature in the form of physical or online data. Proposed Research Methodology The selected research methodology is based on phenomenological paradigm that involves qualitative methodology which will provide descriptive analysis of information to be collected from secondary sources only. The analysis will be based on a deductive approach that will provide important conclusions from the analysis to form an opinion on the effects of the global financial crisis on IFRS and their implications for financial accounting and reporting by Saudi companies. Secondary sources that will be used for collecting important data will be derived from sources including journals, articles, websites, books etc. Research Methodology Limitations Due consideration needs to be given to certain limitations pertaining to the adopted research methodology. These include limitations of the qualitative approach that has been chosen for the proposed research. These suggest that the outcome of the proposed research is dependent upon the limitations of previously literature and risks of errors that are present in those documents are also incorporated in the proposed research. Also since the qualitative research does not involve any statistical techniques therefore the analysis from the proposed research could be considered as descriptive and ambiguous in some areas (Saunders et al, 2007). The proposed research only uses secondary sources for collection of data however primary sources such as survey questionnaire or interview could have been selected for gathering responses from some of the Saudi based companies on their understanding of the implications of the global recession on IFRSs and their effect on the financial accounting and reporting by these companies. Finally, there are variables of time and cost that need to be considered. The time available for the proposed research is limited and no external financing has been sought for carrying out the proposed research. Both these factors could affect the outcome of the research. Ethics Considerations There are certain ethics considerations that need to be identified here. Since the proposed research does not involved any primary research such as survey questionnaire, interview etc. therefore there are no ethical issues pertaining to the rights of respondents such as disclose of personal information, biasness in responses or right of withdrawal. The ethical considerations could include those related to the purpose of the research and the research questions set out for achieving its objectives. It is hereby informed that the objective of the proposed research and research questions is not exhaustive and the outcome depends upon the understanding and knowledge of the researcher. Furthermore, fullest consideration is given to the ethics guidelines of the university particularly in relation to the plagiarism and copyright issues. No information will be part of the report without giving due credit to their providers. Finally, no copies of the final research report will be allowed without the consent of the researcher and his instructor. Disseminations The proposed research report will be furnished to the university in its physical format. It is hereby claimed here that the results that will be furnished in the report are based on interpretative skills and knowledge of the subject by the researcher therefore no business decision should be based on the information presented in this proposal and the final report. No copies of both documents are allowed to be reprinted and distributed without the consent of the researcher and her instructor. Conclusion The above research proposal provides details of different elements of the research that is selected for the proposed subject topic. The objective is set out to determine the effects of global economic recession on international financial reporting standards and develop a case for Saudi based companies. The proposal provides the research questions that are aimed at finding suitable information for analysis. The proposed research methodology is based on qualitative research methodology that will only involve data collection from secondary sources. There are certain limitations of the selected research methodology that are highlighted in this document. Finally, ethical considerations and dissemination of the proposed research report are discussed as a part of the research proposal. References Ary, D., Jacobs, L., Razavieh, A., & Sorensen, C. (2009). Introduction to Research in Education. New York: Cengage Learning. FASB. (2002). Convergence with the International Accounting Standards Board (IASB). Retrieved February 28, 2010, from Financial Accounting Standard Board: http://www.fasb.org/intl/convergence_iasb.shtml IASB. (2008). International financial reporting standards . London: International Accounting Standards Board. IASCF. (2007). A guide through International Financial Reporting Standards (IFRSs) 2007 . London: IASB. IASCF. (2008). Due Process Handbook for the IASB. London: International Accounting Standards Committee Foundation. Putra, L. D. (2009, March 7). What is Current GAAP [under IFRS] For Revenue Recog. Retrieved March 17, 2010, from Accounting Financial and Tax: http://accounting-financial-tax.com/2009/03/what-is-current-gaap-under-ifrs-for-revenue-recognition/ Saunders et al, M. (2007). Research Methods for Business Students. Essex: Pearson Education. Shih, M. S., & Lin, Z.-X. (2002). Earnings Management in Economic Downturns and Adjacent Periods: Evidence from the 1990-1991 Recession. Singapore: National University of Singapore . Sukhraj, P. (2008, April 7). Bank of Scotland chief warns fair value could lead to recession. Retrieved March 22, 2010, from Accountancy Age: http://www.accountancyage.com/accountancyage/news/2213622/sir-peter-burt-warns-fair-value Taylor, B., Gautam, A., & Ghoshal, T. (2006). Research Methodology: A Guide for Researchers in Management and Social Sciences. Delhi: PHI Learning Pvt. Ltd. Trochim, W. (2006). Types of Surveys. Retrieved March 19, 2010, from Available from: Research Methods Knowledge Base: http://www.socialresearchmethods.net/kb/survtype.php Read More