Accounting and Finance Literature Review Assessment Answer

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Table of Contents

Literature Review

1. Barriers to Implementing the International Integrated Reporting Framework: A Contemporary Academic Perspective

The research paper presented by Dumay et al. (2017) made discussions about the potential barriers and incentives in the implementation of International Integrated Reporting Framework (IRF). The paper amalgamates the understandings from peer reviewed researches on accounting into integrated reporting as adopted by the IIRC and integrated reporting (IR) as a general concept. The researchersmainly focus on the potential barriers and emphasize upon the themajor issues that could be rectified for advancing the Integrated Reporting Framework. The research alsocovers the areas that can possibly hinder wider implementation and adoption.

As per the author, Integrated Reporting Framework (IRF) has higher flexibility and there is a lack of prescription in relation to the actual metrics and disclosures which makes this reporting framework capable to be used for compliance purposes. The research incorporated the example of European Union Directive on non-financial reporting and observed both internal and external forces that drive the adoption of integrated reporting. IR is understood in numerous ways and that is why there are various empirical and theoretical challenges for academics.

To conduct the research, the researchers put a simple but core question on which the whole research and findings were based that “What is integrated reporting?” The researchers stated that an entityis allowed to issue a report which is a combination of both financial and non-financial data. Such consolidated report was termed as an integrated report (IR). The researchers also clarified the version of IR that is required to be used while presenting IR results especially on the current integrated reporting framework. The research paper also reveal that there are various empirical studies that are being examining the inclusive impact of the Integrated Reporting model, but the larger proportions of such studies have been includinginformationthat isfrom prior period before IRF came in effect.

The researchers in this report tool the post IR implementation data and on the basis of that proposed two types of internal processes:

That concerns operating activities for adoption and implementation of IRF and thus generating an integrated report.
That associated with the proposed benefits of integrated thinking due to implementation of IRF.

Theoretically, these internal processes are supportively linked and are affected by dynamics that can influence the implementation of integrated reporting framework. For examining these internal processes, it is required to explore and identify possible barriers to implement the integrated reporting framework. Therefore, minimum compliance with regulations,norms, guidelines or directives are required to change employee’sbehaviorand understanding towards sustainable development.

2. Compliance of Financial Statements of Islamic Banks of Pakistan with AAOIFI Guidelines in General Presentation and Disclosure

The study conducted by Ehsanet al. (2019), intended towards investigation of the magnitude of the compliance in relation to the voluntary financial reporting made by the Islamic banks based in Pakistan on the basis of Islamic accounting standards. As per the analysis conducted by the researchers, it has been found out that the Islamic banks based in Pakistan are in compliance with the requirements as suggested by Islamic accounting standards for more than 50%.Islamic banks and the followed financial reporting system are different in operation and nature. Due to such differences, different set of standards and constraints are required for keeping the operations of Islamic banks works smoothly.

The Islamic banking system in the global banking industry is givingtough competitionto the conventional banking system as it includes various comprehensive and distinctive features including asset backed modes of financing and interestfree transactions. The researcher has observed that the Islamic banking modelcome to lightduring late 20^thcentury and started making strong appeal from the initiation for not only Muslims of the globe but have also inspired a large number the non-Muslim population of the world. Pakistan, being a Islamic nation is one of the country that took initiative stepsfor establishment of Islamic banking system in the land of Pakistan.

The preparation, reporting and presentation of financial statements in the business organizations have utmost importance, but with banks the importance and responsibilities gets doubled because the information presented in their financial statements is not aimed at seducingfresh business for the banks but at the same time the goal is to enhance the goodwill and reputation of the organization. The researcher also argued that with accurate, true and fair disclosure of material information in the financial statements can lead the organization towards generation of better opinion of stakeholders about organization.

The Islamic banks have the obligation to periodically publish their financial statements and prepare the financial statements by following a set of rules and regulations. These rules and regulations are formulated and mentioned by various Islamic (and non-Islamic) Organizations, includingAAOIFI formulated FAS and IASB formulated IFRS. However Islamic banking system are different from conventional banks in nature of their business, therefore, recording transactions is also required to be different for whicha distinct and dedicated accounting standards is required by such banks.

3. International Financial Reporting Standard (IFRS) - Problems and Insights in the current Indian Scenario

As per Roopalatha and Sridhar (2020), the institute of chartered accountants of India (ICAI)is responsible for formulating the principles of accounting for various accounting ad financing issues in the Indian territories. However, the goal of ICAI is to converge the Indian accounting standards into the globally acceptable IFRS as much as possible and has been making large efforts towards the convergence policy over the last various years. Also, it is very important to apply IFRS properly during issuance of accounting principles.

However, the researchers have witnessed multiple deviations of Indian GAAP from IFRS that are existed due to certain unavoidable reasons, including regulatory and legal criteria, economic and political system, the level of preparedness, differences in understanding of concepts, etc. Thus, the authors have argued that even though ICAI is deliberated towards convergence of the Indian accounting principles with IFRS, but due to prevailing indigenous problems, it becomes difficult to fully implement IFRS at once.

Therefore, the issue of gaps in the accounting system is going to exist in the Indian markets for some time. Convergence to IFRS is going to attract various changes, majorly in the Income Tax Act and the Companies Act of India. The insurance and banking industries which are the spine of the financial system of the country are also governed by definite acts,but, IFRS has no guidelines based on industry specifications.

The ICAI has issued a blueprint to solve the issues in the convergenceprocess through which IFRS can be adopted in India in phases.The Indian accounting system has various differences with IFRS on the conceptual level, so it is required tomake changesin the regulatory and legal systems of the country to accept IFRS. It is likely to be noted that the blue-chip companies of India have already started conformingthat their accounting practices are in compliance with the International Financial Reporting Standards (IFRS), two years ahead of the required switching date. The researchers have disclosed a list of companies from different industries including IT companies like Wipro, NIIT, Infosys Technologies, etc. automobile companieslike Mahindra & Mahindra, Maruti& Suzuki, Tata Motors, and etc. apparel companies likeBombay Dyeing and the pharmaceutical company like The Dr Reddy's Laboratories. Apart from that KPMG is planning to launch an IFRS Institute in Indiato help individuals and companies transfer from Indian GAAP to IFRS system.

4. Firm Characteristics and Compliance with International Financial Reporting Standards (IFRS) by Listed Financial Services Companies in Nigeria

The researchers IoraverTsegba, Joy Semberfan, Gabriel Tyokoso (2017),investigated the compliance level of listed financial services companies in Nigeria with the International Financial Reporting Standards (IFRS). They alsodiscuss the effectsof the characteristics of the firm on the compliancelevel. The study examined that there is a significant difference between Insurance Companies (INC) and listed Deposit Money Banks (DMB) of Nigeria in relation with IFRS compliance. The study revealed the following key points:-

The IFRS compliance level amongst the firms that have been taken as sample and examined is high and remains around 85.9%.
The profitability of these companies is positive and considerablyrelated with IFRS at 10% level.
The size of the firm and the type of auditor are positive, but are irrelevantlyconnected with compliance with IFRS; and
Internationality and leverageseems to be negative and are irrelevantlyconnected with compliance with IFRS.

Apart from that, the study also reveals that IFRS compliance by DMB is higher than INC,however the difference shows statistically insignificance. The findings made by the researchers are consistent with the theory of signaling which states that the entitieswith good performance have larger incentives for disclosinglager information that signals their good performance. Despite of the of the substantially high level of compliance of Nigerian companies with IFRS, it can be recommended that the Nigerian regulatory agenciesincluding the FRCN (Financial Reporting Council of Nigeria), NSE (the Nigerian Stock Exchange), and SEC (the Securities and Exchange Commission) are required to ensure stringent monitoring and enforcement of high level of compliance with IFRS by each and every listed companyof Nigeria to stimulate more compliance.

The main conclusion that researchers made through this study was that firm attributes of listed financial services companies in Nigeria does not drives the compliance with IFRS. The researchers also recommend that suitable steps are required to be taken by the regulatory agencies to ensure overall compliance of IFRS rules along with mandatory disclosure requirements of IFRS by listed entities in Nigeria.

5. Compliance with international financial reporting standards: the case of listed firms in Ghana

As per Kingsley et al. (2016), Globalization of financial markets has hastened the demands for more understandable and internationally recognized financial reporting standards. Most countries in the world have revolutionized their accounting practices, especially after the recent world economic crisis. This transformational change from the adoption, adaptation and harmonization of local accounting practices with International Financial Reporting Standards (IFRS) is aimed at enhancing consistency, transparency and comparability of financial statements. Cascino and Gassen’s (2012) findings confirm this notion, emphasizing that “firm-, region-, and country-level” incentives promote diverse IFRS compliance. From this point, Eiteman et al. (2007) suggest that heterogeneous financial accounting information encourage investors to diversify their portfolio internationally in an optimal manner.

Little evidence exists on the level of compliance of listed firms to IFRS disclosure requirements in sub-Saharan Africa, especially, Ghana. This study attempts to fill this gap by determining factors that influence the level of listed firms’ compliance to mandatory disclosures in Ghana. The researchers reveal the motivation behind firms’ compliance with mandatory disclosure and, thus, protect their reputational risk, attract viable investments and avoid policy sanctions.

Evidence from prior studies also suggests that quality reporting indirectlyenhances investor goodwill and chances of assessing funds from creditors.The findings of the researcherssuggest that listed firms’compliance to mandatory disclosure has a positive significantassociation with firm size and auditor type. The reason can be attributed to listingrequirementsandavoidance of policy sanctionsour finding on firm size is consistent with prior.This may suggest that large listed firms in Ghana reduce the information asymmetryproblem between investors and management through more compliance with IFRS/IAS. Large listed firms in Ghana are more likely to avoid reputation riskby using experts to work on their financial statement in conformity with IFRS.

Data Sources and Methods

The data collection process for this particular research will typically involve the collection of data from the secondary data collection methods. In the secondary data collection method, the available data in the form of previously conducted researches, journals, websites, etc are used, that means already collected data is gathered, (rather than creating fresh information) to conduct the research. Therefore, it can be referred as second hand data and thus its reliability and authenticity is a little less as compared to the primary data.

The secondary data is the publicly available data as someone-else has already collected and analyzed the same or similar data for their own study or research purposes. However, due to this reason, the new researcher has a variety of options to select the most relevant data that appears suitable for the particular study. In secondary data collection method, the filtration of data is very important and the researcher can implement multiple filters to reach and obtain the most appropriate set of information. This method of data collection involves very little cost and also consume less time as compared to the primary source of data.

Contribution of Reviewed Articles

In the researches, the circumstances of the conventional methods usage has not been addressed in a detailed form and this literature gap addressed here. Emphasizes of the literature studies and implementation of international financial reporting system is discussed in this research to overcome the gap and analyze the inappropriate situations where traditional methods are not much effective with their usage.

In the nutshell, it could be concluded that the business organizations all over the world are currently following various laws and system which are based on domestic circumstances or on specific religion, hence there is a huge requirement of companies to follow a system of accounting that is globally acceptable and IFRS has emerged as a solution. However various countries are trying to converge their domestic GAAP with IFRS but the pace of such convergence process is quite slow.

Reference

Dr.N. Roopalatha&Dr. P.Sridhar. 2020. International Financial Reporting Standard (IFRS) - Problems and Insights in the current Indian Scenario

Dumay, J., Bernardi, C., Guthrie, J. and La Torre, M. 2017.Barriers to implementing the international integrated reporting framework.Meditari Accountancy Research.

Ehsan, A., Saeed, S.K., Shahzad, M.A. and Iqbal, H.R. 2019. Compliance of Financial Statements of Islamic Banks of Pakistan with AAOIFI Guidelines in General Presentation and Disclosure.SEISENSE Journal of Management (SJOM), 2(1).

Ioraver N. Tsegba, Joy Semberfan, and Gabriel M. Tyokoso. 2017. Firm Characteristics and Compliance with International Financial Reporting Standards (IFRS) by Listed Financial Services Companies in Nigeria

Kingsley OpokuAppiahDadsonAwunyo-Vitor Kwame Mireku Christian Ahiagbah, 2016. "Compliance with international financial reporting standards: the case of listed firms in Ghana", Journal of Financial Reporting and Accounting, Vol. 14 Iss 1 pp. 131 - 156

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