An Evaluation of the Effectiveness of Financial Statements in Disclosing True Business Performance to Stakeholders in the Hospitality Industry
Chapter One
Objective of the study
The objectives of the study are;
- To outline factors to be considered when disclosing information in financial statements.
- To carry out a cost benefit analysis on the importance of financial statements.
- To come up with level of reliance that can be placed on financial statements on disclosing business performance.
- To come up with financial information needs for different stakeholders.
- To outline the effects of neglecting other stakeholders when presenting information
CHAPTER TWO
REVIEW OF RELATED LITERATURE
To outline factors to be considered when disclosing information in financial statements
Regulatory requirement regarding disclosure of financial information
The IASB is committed to narrowing the differences in financial statements of different countries by seeking a harmonised regulation, accounting rules as well as regulations associated to how the financial reports should be presented (Conceptual framework for financial reporting 2010). The harmonization has been considered relevant for reports prepared for decision making purpose (Conceptual framework for financial reporting 2010). Garanina and Kormiltseva (2014) stipulated that since the 1970s considerable efforts have been made by various bodies such as IASB to bring together accounting and financial standards around the world to improve the usefulness and comparability of financial reports. In 2002 such initiatives resulted in the approval of the regulation which provides for the mandatory application of IFRSs by companies listed on the European regulated stock markets as of January 2005 (Miihkinen 2008 and Garanina and Kormiltseva 2014). Garanina and Kormiltseva (2014) stated that by 2009 many countries adopted IFRS and other economically well being nations including Japan and Canada had programs in to converge their standards with IFRS. Companies are different from Sole Proprietorship and Partnerships in that limited companies are guided by regulatory framework that makes it compulsory to publish an amount of information that may otherwise be confidential (Collis and Jarvis 2002). Collis and Jarvis (2002) stated that financial disclosure is required for public interest because public companies may raise capital on share market through public subscription to shares at stock exchange. Accounting information is of no relevant when it does not include details of intangible values financial position of an entity (Flostrand and Strom 2006). According to Flostrand and Strom (2006) criticism on argument that financial reports are lagging instead of leading which is the requirement of users. Jenkins Committee of 1991 was appointed by American Institute of Certified Public Accountants Board of Directors to assess the information that was made available to users of financial statements by those entrusted. Flostrand and Strom (2006) stated that the report that was released in 1994 suggested that financial statements should review the future of an entity. Management may be liable to offer voluntary disclosures as a means of clarify areas of argument and management is to decide on voluntary disclosure timing so as to report manipulated gains as well as displaying acceptable alteration to IFRSs by so doing minimize regulatory costs (Iatridis 2012). The idea to furnish investors and other stakeholders with voluntary disclosures may attract a positive thinking on validation of published financial reports. Iatridis (2012) stated that suitable voluntary disclosures may reduce the risks and irregularities that are surrounding the financial statements. ASB statement provides voluntary best practice guidance (Miihkinen 2008). Environmental effects from business operations are under strict inspection from society and consequently the stakeholders are asking for more and qualitatively better environmental information from entities (Fallan and Fallan 2009). Qu, Leung and Cooper (2013) stated that voluntary disclosure is provision of information other than that available in financial report and is not stated as requirement by accounting rules: it is a disclosure made in excess of requirements. The organisation ASL according to the financial statements for the period under review they adhere to requirements of Zimbabwe’s Companies Act and the ZSE requirements that requires public listed companies to prepare and publish its financial statements. Though the company adhered to these statutory requirements the organisation has failed to disclose on environmental issues for the periods 2012 and 2013, in 2014 they highlighted that the organisation has water and energy conservation and waste management as integral part of its operations and will seek initiatives to conserve environment. Therefore there is a need to understand if the regulatory requirements are vital for financial statements to disclosing true business performance.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to an evaluation of the effectiveness of financial statement in disclosing true business performance to stakeholders in hospitality industry
Sources of data collection
Data were collected from two main sources namely:
(i)Primary source and
(ii)Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
Population of the study
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information an evaluation of the effectiveness of financial statement in disclosing true business performance to stakeholders in hospitality industry. 200 selected staffs of Ikeja Hotel, Lagos was selected randomly by the researcher as the population of the study.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain an evaluation of the effectiveness of financial statement in disclosing true business performance to stakeholders in hospitality industry
In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of an effectiveness of financial statement in disclosing true business performance to stakeholders in hospitality industry
Summary
This study was on an evaluation of the effectiveness of financial statement in disclosing true business performance to stakeholders in hospitality industry. Five objectives were raised which included: To outline factors to be considered when disclosing information in financial statements, to carry out a cost benefit analysis on the importance of financial statements, to come up with level of reliance that can be placed on financial statements on disclosing business performance, to come up with financial information needs for different stakeholders and to outline the effects of neglecting other stakeholders when presenting information. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staffs of Ikeja hotel. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made HR, managers, receptionists and junior staffs were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
The major objective of this research was to evaluate financial statements on disclosure of true business performance to stakeholders in hospitality industry. The findings on the objectives of this research supports that the problems associated with these objectives are of effects to financial statements in disclosing true business performance to stakeholders. Therefore the organisation should also implement these results in order to improve on disclosure of true business performance.
Recommendation
The organisation should adopt voluntary disclosure in order to meet the requirements of other non-financial information needs and disclosure on intellectual capitals that are there for the organisation to reduce information asymmetry. According to Iatridis (2012) management may reduce costs that may come due to failure to observe rules and regulations they should do voluntary disclosure
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