Challenges in Financial Reporting of Listed Companies Analysis

This report provides a comprehensive analysis of the challenges in financial reporting faced by listed companies. It begins with an introduction to the importance of financial reporting in the current business environment, emphasizing the need for companies to maintain a competitive edge and attract investors. The report then explores the rationale and objectives of the study, focusing on identifying core problems and creating a synchronized international and national reporting model. The literature review delves into accounting standards, particularly IFRS, and examines the challenges related to their implementation, such as increased volatility, transformations in financial statement presentation, and the costs associated with IFRS adoption. The methodology section outlines the research philosophy, approach, and design, including data collection methods. The data analysis section presents a thematic analysis, covering the benefits and disadvantages of financial reporting. Finally, the report concludes with recommendations for addressing the identified challenges and suggestions for future work, aiming to enhance the effectiveness and accuracy of financial reporting for listed organizations. The report is a valuable resource for students seeking to understand the complexities of financial reporting and the steps needed to overcome its challenges.

Running head: MANAGEMENT ACCOUNTING
Challenges in financial reporting of the listed company
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Chapter 1: Introduction....................................................................................................................3
1.1 Background of the Study.......................................................................................................3
1.2 Rationale of the Study...........................................................................................................4
1.3 Research Objectives...............................................................................................................4
1.4 Research Questions................................................................................................................4
Chapter 2: Literature Review...........................................................................................................6
2.1 Introduction............................................................................................................................6
2.2 Accounting Standards for the implementation of financial reporting...................................6
2.3 Challenges faced in financial reporting of the listed companies...........................................7
2.4 Assumptions of the challenges related to financial reporting................................................9
2.4 Summary of the literature....................................................................................................10
Chapter 3: Research Methodology................................................................................................11
3.1 Introduction..........................................................................................................................11
3.2 Research Philosophy............................................................................................................11
3.3 Research Approach..............................................................................................................11
3.4 Research Design..................................................................................................................12
3.5 Data Collection Process.......................................................................................................12
Chapter 4: Data Analysis and Discussion......................................................................................13
4.1 Introduction..........................................................................................................................13

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4.2 Thematic Analysis...............................................................................................................13
4.2.1 Overview of the International Financial Standards......................................................13
4.2.2 Benefits of Financial Reporting....................................................................................14
4.2.3 Disadvantages of financial reporting............................................................................15
Chapter 5: Conclusion, Recommendation and Future Work.........................................................17
5.1 Conclusion...........................................................................................................................17
5.2 Addressing the Objectives...................................................................................................18
5.3 Recommendation.................................................................................................................19
5.4 Future Work.........................................................................................................................19
Reference List................................................................................................................................20
Bibliography..................................................................................................................................25

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Chapter 1: Introduction
1.1 Background of the Study
In the current time period, it has become increasingly important for the companies to
create a bigger and a better working environment with the help of which the companies would be
able to amplify their business and accordingly maintain competitive edge. It is seen that it has
become increasingly general for the shareholders to undertake investment in the companies in
order to mitigate the level of investment risk with the help of the divergence of the investment
(Steyn, 2014). Hence, the capability to gain knowledge and thereafter compare the financial
reports with the help of which the financial reports and the statements among the organisations in
various markets is significant for the current day capital investors as it is seen that the capital
market has been expanding with the introduction of globalisation.
Rensburg, & Botha (2014) cited that as the countries incorporate IFRS and other
standards for the purpose of financial reporting, the conjunction of the practices of accounting
has become a facet that is irrevocable for the globalisation of the business. In spite of the
incorporation of the IFRS and other standards all over the world, there have been development of
several issues and challenges from several nations and these have been disclosed by the
organizations that are operating in the market. These issues and the challenges have been the
interface among the nation based factors and the incorporation of foreign standards of
accounting.

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1.2 Rationale of the Study
The topic that is associated to the threats that are seen in the process of financial reporting
of the companies that are listed will predict how the organizations would be able to reduce and
minimise the threats that develops from the international and national frameworks of reporting.
This will be helpful to the companies that are listed in order to create an effective
harmonisation in the international and national reporting model (Busch et al., 2016). This would
even assist the accountants and the auditors to create a learning in the core and the essential
elements of the international disclosure on the ascertained approach.
1.3 Research Objectives
The objectives of the research associates with the development of the aspects and
elements that leads to the challenges in financial reporting and accordingly actions and steps can
be taken with the help of which the countries and the organizations are able to make use of the
accounting standards in a much effective manner and thereafter construct their financial reports
that are ideal for them. The objectives that are related to this topic has been explained as follows:
 Recognising the core problems that are faced by the listed organizations in the
international and domestic reporting model
 Create synchronisation in the international and national reporting of the financial
reporting and statements
 Construct efficient and precise financial statement model for the listed organizations
1.4 Research Questions
The research questions that are associated to this topic has been explained as follows:

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Q1. How does synchronisation maintained in the international and domestic documentation of
the financial reports?
Q2. What are the essential issues faced by the companies while documenting of the financial
reports on the international level?
Q3. How financial statement differ from the international reporting styles?

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Chapter 2: Literature Review
2.1 Introduction
This section of the paper consists of the articles and the journals that have been published
in the economy by the other researchers that are based on the development of the financial
reporting and their standards and their standards and how these aspects have been influential for
the development of a better business framework. The researches that are similar in nature have
been assessed in order to create a framework with the help of which this paper can move
forward.
2.2 Accounting Standards for the implementation of financial reporting
According to de Villiers et al., (2014), it is has been disclosed that there are numerous
standards of accounting that have been given within the international financial reporting
standards that needs to be undertaken by every and each of the companies that are listed on an
obligatory basis in order to have an efficient framework of reporting. This assists the
stakeholders to be informational about all the essential financial data of the organization in an
ascertained process.
Enriques, (2015) have viewed that there has been a reflection that the stakeholders are the
actual proprietors of the organization. It is looked upon that if the firm functions their business
on the international extent, it is seen these organizations need to be in compliance with all the
rules and regulations that are international in nature for an effective compliance event.
As explained by Muhammad et al., (2015), it is seen that integrated documentation in the
listed organizations will enhance the general transparency of the financial reports of the

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organization. This would be assistive for the organization to maintain efficient operations of the
business and increase in the level of transparency within the organization.
According to the statements that have been provided by Christ et al., (2015), it can be
explained that assimilated financial documentation should be undertaken by looking into the
taxation and the accounting regulations and rules. It is seen that according to AASB 122, the
financial reports that have been constructed should have all the expenses and incomes that are
permissible by the income tax department.
According to the notion of Ortas et al., (2015), it is seen that if the organization has
efficient level of reporting model, then it would enhance the level of sustainability of the
organization and the brand image with the help of the process that has been ascertained. The
effects of the obligatory corporate sustainability documentation have been the most essential
purpose in order to enhance the organizational transparency. This will enhance the general brand
image of the organizations and will even create efficient level of corporate sustainability in the
business.
2.3 Challenges faced in financial reporting of the listed companies
De Villiers et al., (2017) that the incorporation of new styles of financial reporting would
lead to increased amount of volatility in accordance to the organizational outcome. This has been
due to the implementation of the fair value of accounting in the combinations of the business,
payments that have been share based, assets that have been held for sale and the debt and equity
investments within the new regime. Therefore, it would lead to increased amount of volatility in
the balance sheet and even in the income.

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Dumay et al., (2016) even addressed that the new reporting systems would even lead to
the transformations in the presentation of the financial statements. This is due to the fact that
these new regimes would incorporate new rules and recognition in the identification as well as
the valuation of the assets. It is even seen that there are certain off balance sheet items that are
inclusive of derivatives, asset backed securitisation will be provided into the balance sheet.
The incorporation of the new rules may be inclusive of increased costs. Cheng et al.,
(2014) investigated the incorporation of IFRS by the companies that are in the European Union
by relying on the questionnaires provided to the EU listed companies. The results that have been
attained explains the fact that majority of the companies have incorporated IFRS for various
factors and not only for the consolidation purposes. The process of incorporation of IFRS is
every expensive, tiresome and complex.
There was another research that was undertaken by Burke, & Clark (2016), and it has
done in order to discover the issues, difficulties and the costs related to the convergence of IFRS.
It is seen that most of the companies did not have issues in gathering the essential data in order to
document in accordance to IFRS, however, the gathering of the data has been expensive and
therefore the incorporation of IFRS has been costly as well.
The other challenge that has been found in accordance to the incorporation of IFRS has
been the complex nature of certain IFRS rules and principles. Stent, & Dowler (2015) have
reported that by relying on the data that has been collected by most of the biggest accounting
companies it is seen that some of the IFRS regulations are very difficult to understand and this
had an impact on the operational activities of the business as well. It is seen that the level of
challenges that have been observed in the financial reporting system has been significantly high

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but it is seen that the extent of the positives for the purpose of financial reporting has been higher
as well (Soltani, & Maupetit 2015).
2.4 Assumptions of the challenges related to financial reporting
It has been observed that there have been certain challenges in relation to the
incorporation of the effective financial reporting processes. It is seen that industry accounting
information process has been one of the key issues that have led to the incorporation of IFRS and
other financial reporting processes. Middleton, (2015) explained that this issue has not been
investigated properly by other researchers previously and therefore this is still an issue.
There has been observations as well that have explained the fact that there other factors
as well that had an impact on the incorporation of the financial reporting activities as well. For
instance, it is seen that operational activities of certain industries like construction industry, oil
and gas industry and agricultural industries have been certain industries that have been facing
issues and problems in relation to the incorporation of IFRS (Romolini et al., 2014). It is seen
that most of the companies of various countries have been competent enough in the incorporation
of IFRS but it is seen that some of the companies have not been able to incorporate the same.
Seele, (2016) have even explained that cultural factors has been another factor as well. It
is seen that culture has been different for different countries and therefore the operational
activities as well as the aims and objectives of the business is different. It is therefore seen that
incorporation of the financial reporting process like IFRS would be dependent on it. Gürtürk, &
Hahn (2016) explained that accounting standards are dependent on the socioeconomic
environment, which is dependent on the factors like political, cultural and economic factors. Mio
et al., (2016) explained culture to be a general perception as this looks to take care of the mental
requirement of the individuals as well as it is a method of the general symbols and an estimation

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of the thought of an individual. This explanation acts as a contribution to the accounting
practices which is an interaction among the social structure and the society.
It is even seen that efforts are made in order to enhance the quality of the accounting
information and comparability is maintained with the help of one set of accounting standards all
over the globe which has not been attained yet (Al-Bassam et al., 2018). This therefore explains
the fact that there are numerous threats and challenges that requires to be discovered and
explained within and across the nations that are making use of IFRS. An inter-country
assessment of the issues related to the incorporation of financial reporting has been
recommended, which would act as a way ahead towards sustainable and stable globalisation of
the accounting practices. This would act as a process that would be helpful in the development of
the accounting and financial reporting practices.
2.4 Summary of the literature
The literature has been able to address the fact that there has been several issues and
threats that have been discovered in accordance to financial reporting and it is seen that there has
been a rise in these issues because of the issues that are seen in the accounting standards and
therefore it can be said that these issues needs to be mitigated in order to make the financial
reporting even more effective.

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Chapter 3: Research Methodology
3.1 Introduction
The section that is associated to methodology relates to the understanding of the data that
is ideal for the research and accordingly analysis of the data would be possible with the help of
which outcome of the paper can be attained. This section of the paper would look to assess the
process of analysing the data collected, research design and approach and accordingly data
analysis plan would be undertaken with the help of which the results that would be attained
would be helpful in the development of the results that are desired by the researchers.
3.2 Research Philosophy
The philosophy of the research associates to the development of an understanding and
knowledge and thereby provides an assurance of the process by taking support of the data that is
associated to the research paper. In this manner, it is seen that positivism philosophy has been
chosen for the research as the paper that has been taken into consideration looks to assess the
information that is essential for the explanation of the threats that are related to financial
reporting of the listed companies. This philosophy would explain the data that is available in the
economy and accordingly the results that would be attained would be explained in an explicit
manner with the help of which effective level of results can be attained (Romolini et al., 2014).
3.3 Research Approach
The research approach looks to address the relationship among the framework and the
theories that would be addressed and accordingly these aspects would be used by the researcher
in order to have an understanding of the framework that is ideal and accordingly take measures
with the help of which threats related to financial reporting can be discovered (Zambon 2017). It