Do sovereign wealth fund have sound accountability, disclosure and reporting standards?

Do sovereign wealth fund has sound accountability,
disclosure and reporting standards?
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ABSTRACT
Sovereign wealth fund (SWF) is the investment which is created by it for the diversification
of revenue streams. Fund is invested by the institutions in financial assets such as stocks, bonds,
real estate, precious metals and other alternative investment projects. Present dissertation is based
upon SWFs which is having responsibility to invest funds given by Central bank for making high
value addition on the same. In this, researcher will develop understanding about sovereign fund and
then it will be assessed that whether SWF uses effective accounting and reporting standards or not.
Furthermore, it can be said that SWF also appointed Deloitte as an independent auditor for the
financial accounts of fund. Sovereign Wealth Fund prepares its financial statement by taking into
account generally accepted principles so that performance of the same can be measured in terms of
rate of return and effectiveness on nation. From the secondary data, it has been assessed that
performance level of Sovereign Wealth Fund has significantly improved as compared to the past
years. Apart from that, it also has been articulated that SWF has sound accountability, disclosure
and reporting standards for the preparation and disclosure of information.
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ACKNOWLEDGEMENT
Completing the entire study at own level is a typical task where one needs greater assistance.
Hereby, I would like to impart my sincere thanks to my mentor who provided guidance throughout
the study. I would also like to say thanks to my colleagues for collecting secondary data in order to
reach at the aim of research. Apart from this, my friends' have also made a great contribution in
accomplishing the objective of study and drawing a valid conclusion. For assessing the level to
which sovereign wealth fund has disclosed information according to the standard reporting
standards, interpretivism philosophy and inductive approach has been undertaken by the scholar.
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TABLE OF CONTENTS
ACKNOWLEDGEMENT....................................................................................................................3
CHAPTER 1: INTRODUCTION.........................................................................................................5
1.1 Background of the study.............................................................................................................5
1.2 Research aim and objectives.......................................................................................................5
1.3 Research questions......................................................................................................................6
1.4 Rationale of the study.................................................................................................................6
1.5 Significance of the study............................................................................................................6
1.6 Structure of dissertation..............................................................................................................7
CHAPTER 2: LITERATURE REVIEW..............................................................................................8
2.1 Introduction................................................................................................................................8
2.2 Sovereign wealth fund................................................................................................................8
2.3 Main problems of sovereign wealth funds..................................................................................9
2.4 Ways to overcome the difficulties that are faced by Sovereign Wealth Fund..........................10
2.5 Identifying whether sovereign wealth fund is adopting effective accounting and reporting
standards.........................................................................................................................................10
2.6 Understanding standards adopted for disclosure of information by sovereign wealth fund
(SWF).............................................................................................................................................12
2.7 Generic characteristic of Angolan sovereign wealth fund........................................................13
2.8 Literature Gap...........................................................................................................................15
Chapter 3: RESEARCH methodology...............................................................................................16
3.1 Introduction..............................................................................................................................16
3.2 Research Type...........................................................................................................................16
3.3 Research approach....................................................................................................................16
3.4 Research philosophy.................................................................................................................17
3.5 Research design........................................................................................................................17
3.6 Methods of data collection........................................................................................................18
3.7 Data analysis plan.....................................................................................................................18
3.8 Ethical consideration................................................................................................................19
3.10 Reliability and validity...........................................................................................................20
CHAPTER 4: DATA ANALYSIS.......................................................................................................21
Theme 1:Sovereign wealth fund aims to support government's strategic objectives.....................21
Theme 2: Sovereign wealth fund undertakes accounting and reporting standards........................22
Theme 3:Sovereign wealth fund follow effective disclosure practices for publishing report........23
Theme 4: Present performance of Sovereign wealth fund is better in comparison to the before
times................................................................................................................................................24
Theme 5: Several issues are facing by Sovereign wealth fund in relation to the adoption of
accounting standard........................................................................................................................25
Chapter 5: CONCLUSION and Recommendations...........................................................................27
Conclusion......................................................................................................................................27
Recommendations...........................................................................................................................28
REFERENCES...................................................................................................................................29
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CHAPTER 1: INTRODUCTION
Topic: Do sovereign wealth fund has sound accountability, disclosure and reporting standards?
1.1 Background of the study
Sovereign wealth fund (SWF) refers to the state-owned investment which is created for the
diversification of revenue streams. Such fund is invested by company in the financial assets such as
stocks, bonds, real estate, precious metals and other alternative investment projects. This fund is
invested by the authority at global level with an aim to earn high returns by lowering the risk level.
In this regard, foreign-exchange reserves held by central bank is the main financial source which is
undertaken by SWFs for the investment purpose (Megginson and Fotak, 2015). In the highly
dynamic and strategic business environment, SWFs plays a vital role in maximizing the long-term
returns, managing liquidity and making stabilization in the currency rates. In this way, SWFs makes
remarkable contribution for the growth and development of economy to a large extent by offering
hedging and other investment opportunities.
Sovereign wealth fund has the responsibility to invest fund in such kind of securities which
may result in higher profit margin. Hence, for assessing the performance level of SWF, stakeholders
make assessment of reports which are published by them. In this regard, faith can be developed and
maintained among stakeholders when reports are prepared as well as disclosed according to the
rules of IFRS. Moreover, reports which are prepared according to the rules and regulations of IFRS
ensures high level of accountability, understanding and reliability. This in turn provides
stakeholders with an effectual framework for decision making (Kreander, McPhail and Beattie,
2015). Present dissertation is based upon SWFs which has responsibility to invest fund given by
Central bank for making high value addition on the same. In this context, dissertation will discuss
the level to which SWFs follows reporting standards for disclosing information in a highly
structured manner.
1.2 Research aim and objectives
Researcher’s aim behind this study is to evaluate accountability, disclosure and reporting
standards that are adopted on the part of sovereign wealth fund. By taking into consideration the
aim, following objectives have been drafted by the scholar:
 To develop understanding of sovereign fund
 To identify whether sovereign wealth fund is adopting effective accounting and reporting
standards or not
 To understand the standards adopted for disclosure of information by sovereign wealth fund
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(SWF)
 To evaluate performance of sovereign wealth fund in the recent past and recommend ways
to incorporate improvements
1.3 Research questions
In order to carry out the whole study in right direction, researcher is required to frame
suitable questions on the basis of aim and objectives. This in turn helps scholar in conducting the
study effectually. Research questions for the present study are enumerated as below:
Q 1. What is sovereign fund?
Q 2. What is the extent to which sovereign wealth fund undertakes accounting and reporting
standards?
Q 3. Which kind of standards are adopted by sovereign wealth fund for the disclosure of
information?
Q 4. What is the difference between past and present performance of sovereign wealth fund?
1.4 Rationale of the study
The rationale behind conducting such investigation is to gain deeper insight to the level at
which SWFs consider reporting standards while framing and disclosing accounting reports. It is the
main issue now because faith of stakeholders is associated with the level of accuracy maintained by
institution in financial information. Moreover, reports which are drafted and published according
the reporting standards such as IFRS are highly reliable and comparable in nature (Wang and Li,
2016). Further, reports published in accordance with the rules and regulations of IFRS are highly
transparent in nature. Thus, this investigation helps in assessing the transparency which is
maintained by SWFs in accounting and reporting aspects. This issue will be investigated by scholar
through the means of primary and secondary data. In this way, by analysing the both; researcher has
become able to find out a fair solution of the research issue or problem.
1.5 Significance of the study
Present study defines the level to which accountability has been maintained by SWFs in
information disclosed by it. In this regard, outcomes of the present study will provide stakeholders
with the most valuable information for decision making. Along with this, study and its outcomes
also provide a deeper insight to SWFs regarding the level to which it has maintained sound
accountability, disclosure and reporting standards. Further, study and its results will also provide
assistance to other scholars who are going to conduct study on such topic. Hence, by taking
assistance of such study, other scholars can develop the understanding about such issue. This in turn
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also provides assistance to them for developing new research topic on the basis of gap identified in
study. Thus, it can be said that findings of this study will offer several benefits to other scholars,
SWFs and learners.
1.6 Structure of dissertation
Chapter 1: Introduction
In introduction chapter, researcher sheds light on the background of study. On the basis of
research background, scholar frames aim and objectives of study for directing his efforts in the right
direction. Further, researcher also discusses rationale behind conducting the present study. Along
with this, investigator also presents the extent to which current study and its outcomes are highly
significant. In this section, researcher depicts the structure that will be undertaken by the scholar
during study.
Chapter 2: Literature review
In this, scholar will critically evaluate all secondary sources such as books, journals and
scholarly articles which are associated with the research issue. Hence, by evaluating all such
sources, scholar has become able to gain deeper understanding regarding the research issue. This in
turn helps researcher in preparing thesis for the section of data analysis.
Chapter 3: Research methodology
Researcher determines the approaches and philosophies in this section that will be adopted
by him for the purpose of data collection and analysis. Further, in this, scholar also identifies the
type of investigation that will be undertaken by him for assessing the level to which sovereign
wealth fund follows reporting standards and other norms.
Chapter 4: Data analysis and findings
In fourth chapter, researcher makes evaluation of the data which is gathered by him by
taking into account the suitable technique. Hence, in this, scholar exhibits outcomes of study in a
highly structured format through the means of graph and tables.
Chapter 5: Conclusion and recommendations
Investigator concludes all findings of study in such a manner which reflects that the aim and
objectives are fulfilled by scholar to a large extent. Besides this, scholar also gives
recommendations on the basis of issues identified during study.
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CHAPTER 2: LITERATURE REVIEW
2.1 Introduction
Literature review is the most important chapter of dissertation which consists of detailed
information related to research. It assists scholars to understand the concept behind associated
matter and accordingly, develop in-depth understanding. In the current study that is on evaluating
accountability, disclosure and reporting standards adopted by sovereign wealth fund, researcher has
used secondary study under which number of sources were considered for the collection of
information. Here, researcher has gathered important information related to topic so that fruitful
results can be produced. At first, researcher developed understanding about sovereign wealth fund
and then it has been assessed that whether sovereign fund uses effective accounting and reporting
standards or not. Apart from this, standards adopted for disclosure of information of by SWF has
also been understood with the help of different sources of information. Apart from this, performance
of SWF in the recent past has been evaluated.
2.2 Sovereign wealth fund
The Fundo Soberano De Angola (FSDEA) is known as sovereign wealth fund owned by
Republic of Angola. It follows investment policy and guidelines for the purpose of diversification
across asset classes and number of industries. It aids to generate long term financial return for the
enhancement of society and to determine economic development with specific focus upon
generating wealth of people of Angola. It was launched in October and receiving huge coverage
from media such as CNN, Euro-money and New York Times. During April 2015, FSDEA thought
to allocate finance on new vehicles which will perform the investment activities in different sectors
such as timber, mining and agriculture (Fundo Soberano De Angola, 2016). Along with that,
healthcare sector of country was also considered with investment of 400 million dollar whereas 250
million dollar were decided to be invested on timber, agriculture and mining. It proves to be
effective to generate appropriate return and accordingly, to fulfil the expectations of people living in
society.
Sovereign wealth fund (SWF) is a state owned investment that is being spent on real and
financial assets such as bonds, precious metals and stocks. Along with that, alternative investments
hedge funds and private equity fund are also included. Main objectives of sovereign wealth fund is
to protect & stabilize the budget from excess volatility in export or revenue (Fundo Soberano de
Angola announces 2015 investment update, 2016).
Political strategies are also adopted by fund in order to ensure successful operation. It proves
to be effective to earn greater rate of return than on foreign exchange reserves. It enables the
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