Comparative Analysis of IFRS and UK GAAP for Business Compliance

This report assesses the effectiveness of International Financial Reporting Standards (IFRS) in meeting compliance requirements for businesses in the United Kingdom. It begins with an abstract outlining the purpose of the study, which is to determine if IFRS is effective for organizations to meet compliance requirements. The report then provides an introduction that emphasizes the importance of IFRS in maintaining financial stability and transparency. A literature review explores the importance of IFRS in business, comparing it to UK GAAP, and identifies challenges in adopting IFRS. The research methodology includes a deductive approach using a survey strategy, employing both primary and secondary data collection methods. The primary data collection involves a questionnaire for 30 respondents, while secondary data is gathered from books, journals, and articles. The conclusion emphasizes the necessity of IFRS for preparing financial statements and raising capital internationally, as well as its benefits for both organizations and investors.

Business

Table of Contents
ABSTRACT ....................................................................................................................................1
TITLE :............................................................................................................................................1
Clarity of Dissertation ....................................................................................................................1
Literature Review ............................................................................................................................3
Research ..........................................................................................................................................5
Quality of Analysis .........................................................................................................................7
Conclusion and Recommendations................................................................................................16
.......................................................................................................................................................18
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ABSTRACT
IFRS are refer as a standers issued by the foundation of international financial reporting
standards and the international accounting standards board to give a common global language for
business. Main purpose of this report is to identify the effectiveness of IFRS for an organisation
to meet with compliance requirements. For collecting accurate information about such topic,
primary and secondary method used by the researcher. In case of primary source, researcher
prepared a questionnaire of 30 respondents. On the other hand, under secondary method, books,
journals, literature review was applied to collect accurate data about the topic. Thus, as a
conclusion, IFRS is require by each and every organisation to prepare their financial statement
and raised capital at international level.
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TITLE :
To assess the effectiveness of IFRS pertaining to meet compliance requirements through
the business in United Kingdom: A comparative study on IFRS V/s UK GAAP.
Clarity of Dissertation
Introduction
IFRS is effective in order to maintain the stability and transparency around the financial
globe. This also allows an individual or a business’s investors to make appropriate or educated
financial decisions. Thus they are capable to see exactly what has been happening within
organisation (Akoroda, 2012). IFRS is effective in pertaining the needs and requirements of
small as well as large size business organisations throughout the United Kingdom. Now a day's
the world market has become progressively incorporated, thus various issues have raised in the
domestic markets as well as rising markets because of the deviations in environmental aspects
like, religious, cultural, social, and local accounting activities. On the other side, UK and US has
provide significant importance to Generally Accepted Accounting Principles (GAAP), it is
identify as an aspect which based on various rules and regulations, whereas IFRS is depend on
accounting principles. Present study is based on effectiveness of IFRS pertaining to meet
compliance requirements through the business in United Kingdom and in this comparative
analysis on two different aspect like IFRS V/s UK GAAP will also be done in appropriate
manner.
Background of the Research
IFRS have been considered as a part of financial reporting in the country of UK, since the
year of 2005, when EC regulation 2002/1606 is came into appropriate action. The UK’s
Accounting Standards Board (ASB) has represented as an Exposure Draft FRED 43 Application
of Financial Reporting Standards that outlining its plans for the future of financial reporting in
the UK. In the case of approval, the standard will acquaint as a three-tier approach that will
necessitate business entities which have previously reported under Generally Accepted
Accounting Principles in the UK which is referred to in this document as UK GAAP to adopt
either EU Adopted IFRS (IFRS) or the proposed Financial Reporting Standards for Medium–
sized Entities (the FRSME). In the modern business environment, the major purpose of a small
as well as large business enterprises is to attaining higher growth and success within the
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commercial centre in respect to meet with the compliance requirements (Alfraih, 2017). UK is
known for its wide area of business and the country has adopted IFRS, for providing benefits to
both organisation and investors. With the help of IFRS investors are more likely able to invest
money into the company if the business practices of an organisation are transparent. Thus,
investment cost are usually low and the business firm that operates at international level attain
huge benefits from the IFRS through exploring their business at wide level.
Research Aim
It is identify as an essential part of the project because entire study of research is based on
this. This can also be considered as a predetermined statement in which the research issue is
mentioned. The essential aim of this particular research is:
Aim - “To analyze the effectiveness of IFRS pertaining to meet compliance requirements by the
businesses in United Kingdom”.
Research Objectives
The effective research objectives are described as below:
 To identify effectiveness of pertaining IFRS in businesses
 To examine differences between IFRS and GAAP
 To identify the challenges or issues in adopting IFRS by UK and US organizations To provide effective recommendations related to the study.
Research Questions
The potential research questions that covers the aims and objectives of this particular
research are associated as under:
 What is the importance of pertaining IFRS in business?
 What are the major differences between IFRS and GAAP?
 What are the challenges and issues in adopting IFRS in UK and US businesses?
 How accounting can be improved in companies?
Literature Review
This can be considered as the most essential part of research project as it provides an in
depth analysis on the research issue through discussing the opinion of various authors and writers
(Day, 2012). This section of the investigation is effective in completion of the research work
through accumulation of relevant data and information. In this part of the research data and
information is being gathered through secondary sources like books, journals, newspapers,
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articles etc. in this past research project related with the similar area of study plays vast role in
carry out the investigation in right direction.
The importance of pertaining IFRS in business.
As per the views expressed by Mitchell Boogren, (2017), International financial reporting
standard is considered as a set of accounting standards that are developed through the (IASB)
international accounting standard board. Such type of standards are refers as the most effective
and common global standard that are appropriate for the preparation of financial statements.
There are various importance of pertaining IFRS in business organisation, some are described as
below:
 International financial reporting standard (IFRS) is a crucial aspect which is widely
applied by organisations as to representing its financial statement, thus it plays vast role
for the foreign competitors of the firm in respect to making comparison within the
organisational performance.
 IFRS is also effective for the organisations to raise its capital at international level.
 Organisations are also requires to convert to IFRS if they deal as a subsidiary of a foreign
firm, in case of application of IFRS or if the firm have foreign investor.
The major differences between IFRS and GAAP.
As per the opinion of Sean Ross, (2018), International Financial Reporting Standards
(IFRS) is considered as an accounting tool which is applied in different countries around the
globe. It has various sort of key difference from the Generally Accepted Accounting Principles
(GAAP). The key differences between IFRS and GAAP accounting are associated as below:
Locally vs. Globally: IFRS is an effective and globally used standard for accounting and this is
widely considered by more than 110 countries around the world. On the contrary, GAAP is
majorly applied within the United States and has a vast set of rules for accounting than most of
the globe.
Rules vs. Principles: The key difference among IFRS and GAAP accounting is the tool or
methodology which is used to assess the accounting process. IFRS looks at the overall pattern
and a principle based accounting standard, on the other side GAAP is concerned on research and
it is a rule based accounting standard.
The challenges and issues in adopting IFRS in UK and US businesses
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IASB funding, staffing and governance structure: According to the Alfraih, (2017) .In
this challenge, the adopters needs the assurance of IASB true independence with stable &
supportive funding, expert staffing, appropriate governance to ensure the standard setting process
which is free from undue influence and politicization of manoeuvrers.
Compliance issues and enforcement mechanism: There are various level of compliance
with the IFRS despite claims by the companies that their financial statements complying with
IFRS.
Brief conclusion: It is concluded that all these challenges and issues are required to be
overcome in order to make the accounting effective and useful into the business operation and
activities.
The ways through which accounting can be improved in companies
According to the Day, (2012) In the corporate world, companies are suffering with an
issue of improper accounting and its desired results. It is essential because proper standard and
policies have not been used while preparing and recording the entries of the business operation
and functioning. There are many ways through which accounting can be improved and managed:
a) Time tracking is the kind of tool in which business entities can track and manage the
information in accordance with time taken. By tracking the information more efficiently,
companies would be able to drive the better accounting results in the most suitable time and
duration. b) Pure financial system is the kind of structure in which there are different valuable
standards which is required to get the preparation of accounts and arrive at the effective financial
position of business in the mean-time.
Research
Research is an effective process of collecting data or information for the purpose of
making accurate business decisions. The methodology may cover interviews, survey, publication
research and many other useful techniques. It also help the investigator to collect historical and
present information about the topic (de Ricquebourg, Alan and Clacher, 2013). Research onion is
more suitable and appropriate framework used by researcher to accumulate relevant information
or data from the respondents. This model has different layers which are determined as under:
Research philosophy: There are basically two type of research philosophy used by the
researcher for collecting information related to the topic. Positivism and interpretivism are called
as a kind of philosophy which will help an investigator to accumulate data from the respondents.
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According to the research topic, interpretivism philosophy will be applied because it assists in
evaluating information effectively (Dodd, Louca and Paudyal, 2015). On the other side,
positivism philosophy is not suitable because it takes more time for carrying out research activity
systematically.
Research Approach: There are mainly two types of research approach namely inductive
and deductive. According to the topic, investigator can follow deductive approach of research
and in which they can develop a hypothesis or theory and design an effective research strategy in
order to test hypothesis (Florou and Shuai, 2017). On the other hand, inductive approach, in
which researcher will gather information and create a theory as the outputs of data analysis.
Deductive approach is more suitable for this topic because it help in achieving better outcomes
for the research.
Research Strategy: This part of the research methodology is introduce as a road map
towards the objective or goal of study a56nd how to accomplish this goal in order to answer
research questions. There are some research strategies such as experiment, survey, case study,
action research, grounded theory, archival research and ethnography. All this are useful and
essential but as per the research topic, survey is used because it help in identifying accurate
response of employees about the topic.
Research choice: There are two essential method of research such as qualitative and
quantitative. Thus, both methods are important for gaining better outcomes but according to the
topic, researcher select quantitative research because it provide numerical and detail information
about the study (Folgerø-Holm, 2014). Thus this, method help an investigator to answer research
questions appropriately.
Time Horizon: It is another important part of the research opinion, for this investigator need to
used Gantt chart tool for evaluating time period of research activities. This technique helps a
researcher to identify starting and closing time of each activity of research.
Techniques and procedures, and research instruments: Primary and secondary source
of data are identified as an effective instrument of research which is used with the purpose of
collecting appropriate data from the participants. Questionnaire is more appropriate method of
primary source which is prepared by researcher to accumulate relevant data about the topic from
the respondents (Iatridis and Alexiou, 2014). On the other hand, secondary source, for collecting
this type of information, researcher used to read books, journals, articles, publication research
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etc. Therefore, both type of reserch instrument are useful but according to the research topic,
primary source is suitable because it help researcher to analysis proper response from the
employees side.
Research Sampling: It is divided into two parts random and non-random sampling
method. In case of non-random sampling, it is a best technique where the samples are collected
in a process that does not provide equal changes to the entire populations of being selected. On
the other side, random sampling is more difficult to accomplish this (Kalcheva, 2016). Thus, as
per the study, non-random method is suitable and in which convenience sampling used for
collecting data from the 30 employees.
Research Ethics: Research that covers participants or respondents raises complex and
unique ethical, political, social and legal issue (Khadaroo, 2014). It is mainly interested in the
evaluation of ethical problem that are raised when large number of person are involved in the
reserch. Principles related to research ethics includes, informed consent, confidentiality and
anonymity. For this, researcher should try to not ask inaccurate and personal questions to the
respondents.
Research Limitation: There are different limitation or issue which are witnessed in
carrying out research activity at that time. For this research, time is identify as a major limitation
because topic is large for getting employees response about the research. In this, research need
accurate time period, thus, with the absence of particular time, researcher can not complete
research activities effectively (Kisaku, 2017).
Research Reliability and Validity: Research reliability is mainly based on the test
instruments including survey questionnaire. It is essential for the researcher to accumulate proper
response of employees about the topic of research. Questionnaire provide validity information
about the topic which will support an investigator to analysis issue arise during the close-ended
questionnaire.
Questionnaire
Q1) Are you aware about the concept of International Financial Reporting Standards
(IFRS)?
a) Yes
b) No
Q2) What is the importance of pertaining IFRS in business?
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a) Raising of capital at international level
b) Developing operations and performance at global level.
Q3) What are the major differences between IFRS and GAAP?
a) Locally vs. Globally
b) Rules vs. Principles
c) Consolidation
Q4) What makes the IFRS suitable for the UK and US businesses than GAAP?
a) Compliance management
b) Complete governance structure
c) Consistent adoption
Q5) How accounting can be improved in companies?
a) Time tracking
b) Expenses and revenue management
c) Proper collection
Q6) How IFRS standard is relevant and suitable for improving the accounting for UK and
US companies?
a) Effective financial position
b) Regulation of outflow of funds
c) Standardisation of business
Q7) What are the challenges and issues in adopting IFRS in UK and US businesses?
a) Staffing and governance structure
b) Compliance issues & enforcement mechanism
c) Cultural and structural change
Q8) Who Are The main Key Players In The US Regarding the Adoption and
Development of IFRS?
a) Securities and Exchange Commission,
b) Financial Accounting Standards Board
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Quality of Analysis
IFRS 9 model: The implementation of IFRS 9 is the process which touches both finance
and risk functions creates the need to account the difference in the culture, as well as the
common understanding of the concept of loss in the two function:
Finance function: This function is basically focuses on product and also which is driven
by the accounting standards (Krahel, 2012). This function uses the arithmetical operations to
report the expected /incurred loss on the P&L and uses the decentralized data to populate
reporting templates.
Risk function: This function is focused on the counterparty and also is driven by a
different set of regulation and guidelines. Along with this, risk function also uses the stochastic
approach to model losses and the database to store the data and also run the calculation.
Discussion:
The IFRS Standards have therefore been designed to overcome the challenge in regards
to the proposition and interpretation of financial information in today’s world of wide financial
markets. At the conceptual level, IFRS is refers as a principle based accounting standard in
contrast to GAAP, that is determined as more rules base accounting standard (Michael and Goo,
2017). on the other side it is required for each small as well as large business enterprises to
analyse the variation of these accounting methods in respect to appropriately assist the operations
of the firm at domestic as well as internation level. IFRS is not essential and significant for the
company because it requires high costs, not globally accepted etc.
Consistent adoption, application and regulatory review: In the present time, most of the
IFRS adoption are in the label along with various version which are inconsistent with the IASB
prescription. In context with UK and US businesses, there are lots of uneven applications,
breeding of different IFRS versions. Expense management is the sheet which is required to the
save time and money by recording the expenses and cost in the spreadsheet to avoid and
eliminate the duplication of data. These ways would be effective and relevant to keep and
maintain the accounting in the proper manner (Mookdee, 2013).
Data analysis: It will be done with the support of thematic analysis. In this, different
themes are made on each and every questions. For this, researcher prepare a questionnaire of 30
managers which are shown as under:
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