Research Proposal: Convergence of Accounting Standards Effects

This research proposal investigates the convergence of accounting standards and its effects on the manufacturing industries. The proposal begins by explaining accounting standards and convergence, then delves into the background and rationale for the study. It outlines the research aims, objectives, and questions, followed by a literature review that explores concepts related to accounting standards and convergence. The methodology section details data collection processes and appropriate data types for the research. The proposal includes a table of contents, background of the study, rationale, objectives, research questions, structure, literature review, methodology, and a Gantt chart. The study aims to assess the impact of convergence on manufacturing, considering globalization's influence and the need for uniform accounting practices for international trade. The research will employ primary data collection to gather insights into the topic, and the proposal also addresses ethical considerations and limitations.

Running head: RESEARCH PROPOSAL
Convergence of Accounting Standards is good for the Industry
Name of the Student:
Name of the University:
Author’s Note:

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RESEARCH PROPOSAL
Abstract
This paper looks to assess the effect of convergence of the accounting standards for the
manufacturing industries that are operating in the economy. The proposal has the intension of
creating a guideline and the action course with the help of which an extensive research can be
undertaken on this topic. The proposal initially provides an insight on the explanation of
accounting standards and the meaning convergence. Thereafter, the background of the study
along with the rationale for undertaking this research is even explained. The aims and objectives
in accordance to which the research would move forward is even mentioned in this segment of
the proposal. The literature review on the other hand explains the various concepts and the ideas
that are associated to accounting standards and convergence and what other researchers have
suggested on these aspects. The methodology section of the proposal addresses the process of
data collection and the kind of data that is suitable in order to complete research on this topic.

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Table of Contents
Chapter 1: Introduction....................................................................................................................4
1.1 Background of the Study.......................................................................................................6
1.2 Rationale of the Research......................................................................................................9
1.3 Research Aims and Objectives..............................................................................................9
1.4 Research Questions..............................................................................................................10
1.5 Structure of the Proposal.....................................................................................................10
Chapter 2: Literature Review.........................................................................................................12
2.1 Introduction..........................................................................................................................12
2.2 Nature of Convergence........................................................................................................12
2.3 Benefits of convergence of accounting standards...............................................................13
2.3.1 Network Externalities...................................................................................................13
2.3.2 Comparability...............................................................................................................14
2.4 Costs of convergence of accounting standards....................................................................15
2.5 Empirical Studies.................................................................................................................16
2.6 Brief history of convergence and accounting standards......................................................17
2.7 Accounting Standard...........................................................................................................18
Chapter 3: Research Methodology................................................................................................20
3.1 Introduction..........................................................................................................................20
3.2 Justification for the choice of methodology used................................................................20

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3.3 Research Objective..............................................................................................................21
3.4 Research Philosophy............................................................................................................21
3.5 Research Approach..............................................................................................................22
3.6 Research Design..................................................................................................................23
3.7 Research Strategy................................................................................................................23
3.8 Data Collection Method.......................................................................................................24
3.9 Population............................................................................................................................24
3.10 Sample...............................................................................................................................25
3.11 Data Analysis Method.......................................................................................................25
3.12 Ethical Consideration.........................................................................................................26
3.13 Limitations of the Research...............................................................................................26
3.13 Gantt chart.........................................................................................................................27
3.14 Summary of the Methodology...........................................................................................27
Reference List................................................................................................................................29
Appendix........................................................................................................................................34
Questionnaire.............................................................................................................................34

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Chapter 1: Introduction
The modern world has various organizations that are operating successfully and are
undertaking transactions and communications with other firms in order to sustain their
operational activities. With the advent of globalization, companies from various parts of the
world have been interacting with each other and have been undertaking transactions in order to
make the business more appropriate and thereby expanding their business. In order to make the
world a worldwide market International Accounting Standard Board (IASB) has constructed
various accounting standards in order to establish uniformity in the aspect of accounts globally
(Chen, Ding and Xu 2014). Accounting is one of the key components with the help of which
individuals and organizations are able to maintain a record of their financial transactions thereby
establishing their business successfully.
The process of convergence refers to the coming together or the explanation of the direct
relationship between two trends which can be price or any other indicator. In the current time
period with the development of various standards in the global accounting system, there has been
a need for undertaking convergence of several accounting standards in order to make it easier for
the international traders and marketers to perform in the global economy. With the advent of
globalisation, there has been a rise in the level of international trading and in order maintain a
healthy accounting and transactional activities, it is essential to maintain an accounting system
that would be helpful for both the parties who are undertaking the business. The need is more
extensive in case for the manufacturing industries has they are the one who undertake several
kinds of import and export activities and thereby interact with other organizations from other
countries. The greater focus on convergence is an outcome of the waves of globalization that has
been riding along throughout the globe. Most of the organizations are transforming to

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multinational firms and therefore have their functions and operations in several parts of the world
with a rise in the subsidiaries franchises and joint ventures. The capital market that is existent in
various continents has become interweaved. The stakeholders and the investors now have
additional access in the financial market and international organizations than previously (Wang
2014). It is essential to maintain the development in the effectiveness of the markets in order to
keep them healthy. Conversely, the major concern has been the existence of different regulatory
standards in many countries for the purpose of financial reporting. Therefore, the interpreting the
financial statements from one kind to the other is troublesome as it is time consuming and costly.
The investors look to be aware of the variations when assessing the international firms and this
misrepresents the consistency and comparability. The financial statements become unusable to
the investors when they are not comparable completely. Therefore, it creates the chance that
international investors restrict themselves from undertaking investments in foreign organizations
as they are unable to understand the financial statements of the firm (Oulasvirta 2014). These
circumstances can be observed mainly in the manufacturing industries where there have been
several kinds of business and financial interactions and thereby it makes it difficult for the
organizations to maintain an accounting statement that will be acceptable in any country. It is
due to this factor that convergence of the accounting standards is crucial in order to make the
investors satisfied and thereby improve the operational activities of the industries. This proposal
therefore looks to assess the convergence of accounting standard and how it can improve the
operational activities of manufacturing industries as they are the main concern in this research
proposal.

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1.1 Background of the Study
The proposal concentrates on the convergence of the accounting standards that are
existent in the global economy and how it has an impact on the manufacturing industries. The
process of convergence and harmonisation explains the application of various approaches for the
purpose of accounting for the purpose of integration among the accounting methods.
Harmonisation addresses the similar accounting policies incorporated by the organizations all
over the globe (Tschopp and Nastanski 2014). The rate of adoption of any sort of policies in the
process of accounting increases, the convergence of the accounting policies rises.
The examination of the origin of the differences among the accounting standards in
various countries is essential prior to the explanation of convergence. Political factors are the key
reason for the differences in the accounting standards in various countries. For instance,
Germany and France always had significant influence on the regulations of accounting. The
government of the country was hugely concerned about safeguarding the creditors and hence
accounting standards that have been constructed is based on the historic cost and that looked to
minimise the assets and profits (Bushman 2014).
In countries like USA and United Kingdom, the independent accounting boards are
accountable for the regulations with the focus on the protection of the investors. Conversely,
there has been numerous studies that have addressed that cultural factors have influenced the
differences among the national standards of accounting (Apergis, Christou and Miller 2014). The
studies have explained that differences in the accounting standard is unavoidable as they are
existent in different environment and answer to different directives and is an outcome of the
various standard constructing processes and structures.

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The method of convergence is a significant challenge and the success of convergence is
dependent on the relentless compromise among the key accounting standard boards. The first
step towards convergence was undertaken by the European Union. In the year 2001, the
European Commission declared a regulation that the companies that are listed within the
European Union had to incorporate the international standards for the consolidated financial
statements (Carraher 2014). This was an answer to the capital market of the European Union
losing their competitiveness as many organizations thought if undertaking investments in the
capital market of USA as the capital market of the country is integrated and larger. There are
various countries globally who have incorporated the use of the international standards. The
main aim of convergence has not been to accomplish similar statements but look to attain
compatible statements where there are no deviations on how to account for similar transactions.
In spite of the various issues that have been faced by the convergence project, there have
been key achievements that have been attained. One of the key achievements for convergence
was the developments made in association to the accounting of goodwill (De Simone 2016).
IASB even changed their IAS 22 with IAS 36 that restricted the goodwill amortization. This
transformation aligned the international standard towards goodwill more relatively with the
SFAS 141 of FASB with respect to which the goodwill is examined frequently for impairment
and losses in impairment is identified in the same manner. The other instance that was
observable has been that the conceptual framework that is available in USA and IFRS are quite
similar and therefore has been converging with the existing efforts by the FASB and the IFRS. In
US GAAP, the conceptual framework is just a guide for the standard setters in disseminating the
standards of accounting. In IFRS, the conceptual model is not utilised as a guide for creating the
standards but even provides a foundation for the practitioners to undertake judgments related to

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accounting in circumstances when the other IFRS standards are not applicable. The difference
that has been existent is that IASB looks make use of the one step process to an impairment
examination in comparison to the two-step process of FASB (Young and Zeng 2015). There are
key approaches in enhancing the level of consistency of IAS and US GAAP. Additionally further
work needs to be undertaken for the special purpose entities and the joint ventures. A significant
issue with respect to the special purpose entities that requires to be explained is the definition of
when an organization has authority and control over another.
The main reason for selecting this research topic is due to the fact that with the advent of
liberalisation and globalisation, there have been several companies that have been operating
internationally and have been facing difficulties in undergoing business. The difference in the
accounting standards due to various related factors in a country has forced to the process of
accounting standards. This is a key topic of concern and therefore an assessment on this topic
would be helpful in creating knowledge and answer that would be helpful in determining the
significance of the convergence of the accounting standards and their impact on the
manufacturing industries. The other factor for selecting this topic has been because of the fact
that this is an accounting topic and therefore research on this topic would be helpful in gaining
additional knowledge on accounts and accounting standards. The research that would be
undertaken would be a primary research and therefore the data that would be used in order to
discover whether convergence of accounting standards is good for an economy would be known
with the help of the responses that would be received from the selected respondents. The primary
research and use of primary data can be helpful in attaining the new and fresh ideas and feelings
and thereby would be able to gain an insight on the current scenario and what the respondents
feel about convergence of accounting standards. Secondary research is not applied in this topic

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because of the fact that accounting standards change along with time and there have been
incorporation of several accounting standards and therefore reactions on these standards and
whether convergence of these standards would be helpful for the accounting perspective would
be known with the help of the primary research and not secondary research.
1.2 Rationale of the Research
The topic that has been taken into consideration is one of the key concerns for the
International Accounting Standards Board (IASB). There have been various researches that have
been undertaken earlier in accordance to which there has been an observation that convergence
of the accounting standards is required in order to globalise the accounting standard and thereby
improving the financial statements and the functional activities of the organizations globally
(Phang and Mahzan 2017). There are various other aspects with respect to which the accounting
standards need to be assessed and thereby convergence of the accounting standards can be useful
with the help of which the organization can improve their current financial scenario. Furthermore
research is required as changes have been taking place in the economy and accordingly changes
have been taking place in the accounting standards implied in various countries which makes the
investors and the multinational companies confused. The assessment of the process of
convergence is essential in order to understand whether it can have an impact on the companies
that are functioning in the world.
1.3 Research Aims and Objectives
The research aims and objectives look to assess the aspects that are associated with the
accounting standards and thereby understand the requirement of convergence. The objectives
explain the elements on which assessment has to be taken with the help of which impact of

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accounting standard convergence can be attained. The research aims and objectives are as
follows:
 Undertake a comparison of the various accounting standards with the IASB
 To examine the challenges and the risks associated with the incorporation of the
accounting standards that provides knowledge about the language of financial reporting
 To undertake a comparison of the profitability of the organizations converging their
accounts with the accounting standards
 To provide recommendations towards the successful incorporation of the convergence of
the accounting standards.
1.4 Research Questions
The research question is constructed in order to have an idea about the elements that
would be taken into consideration in order to have an idea about the convergence of the
accounting standards. The research questions are as follows:
Q1. What are the risks and the challenges that are related to the convergence of the accounting
standards globally?
Q2. How does convergence of the accounting standard have an impact on the profitability of the
organizations?
Q3. How is the accounting standards associated with the policies laid down by the International
Accounting Standard Board?
1.5 Structure of the Proposal
The research proposal that is being constructed tries to explain the impact on accounting
standard convergence on the operational activities of the organizations. The introduction section

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explains what accounting standard is and how it has an impact on the financial statements and
reporting of the organizations. The background that is associated with the convergence of the
accounting standard is even addressed in order to have an idea about the various accounting
standards that are existent globally and what actions has been taken in order to converge the
accounting standards globally. The research aims and objectives explain the course the
researcher will undertake in order to complete the paper in an authentic and precise manner.