Assigment Strategies that Financial Managers Use to Effectively Conduct

Section 1: Foundation of the Study

Financial sustainability has become the buzzword in many organizations. It has

many definitions, but in the corporate world, it refers to the stability and profitability of a

company (Montoya et al., 2019). Adopting financial stability initiatives is profitable for

business organizations (Ameer & Othman, 2012), and integrating financial stability into

the long-term business strategy may provide a competitive advantage (Lacy et al., 2012).

Managers of financial institutions should use reliable financial analysis tools to

accurately assess their organizations’ ability to achieve financial stability (Sherman &

Young, 2016), which should be reflected in the organization’s financial reports and

performance. Im and Nam (2019) stated that “a firm’s financial performance as well as

the quality of reporting is likely to reflect the fulfillment of the manager’s fiduciary

responsibilities and reporting obligation” (p. 1). Financial reporting is the process of

providing important and accurate information to investors to make sound financial

decisions, avoiding financial fraud (Mankin, et al., 2017). The purpose of this qualitative

multiple case study was to explore strategies that financial managers used to effectively

conduct corporate-responsible financial reporting to achieve financial stability.

Background of the Problem

Financial stability is a broad construct that evolves from an agreed definition

within the business world (Haugh & Talwar, 2010). A company’s structure, strategy,

vision, goals, profitability, financial performance, market power, stockholder profitability,

employee involvement, and global presence define financial stability (Ferdig, 2007). The

constant pressure to accurately measure and achieve financial stability remains a

challenge to many managers (Mankin et al., 2017).

A trend toward integrating financial stability with financial results emerged from

the International Integrated Reporting Council’s efforts to develop a global integrated

reporting framework (James, 2013). Though other researchers have explored the way

leaders control financial stability, the problem still lies around understanding the strategic

tools needed to maximize an acceptable level of control. Several researchers have

demonstrated that poor financial reporting leads to the closing of existing companies

(Alozie, 2020). Financial managers must conduct corporate-responsible financial

reporting to achieve financial stability (Sherman & Young, 2016). Therefore, the purpose

of this qualitative multiple case study was to explore strategies that financial managers

used to effectively conduct corporate-responsible financial reporting to achieve financial

stability.

Problem Statement

Financial managers may experience negative effects on the financial stability of

their business organizations if they do not conduct corporate-responsible financial

reporting effectively (Hilliard & Priede, 2018). For instance, financial managers at Enron

did not conduct corporate-responsible financial reporting effectively, which resulted in

financial fraud that translated into Enron not achieving financial stability because the

financial fraud cost shareholders $74 billion (Dong et al., 2018). The general business

problem is that some financial managers may not conduct corporate–responsible financial

reporting effectively, if at all, which has a negative effect on the financial stability of

their business organizations. The specific business problem is that some financial

managers lack strategies to effectively conduct corporate-responsible financial reporting

to achieve financial stability.

Purpose Statement

The purpose of this qualitative multiple case study was to explore strategies that

financial managers use to effectively conduct corporate-responsible financial reporting to

achieve financial stability. The target population consisted of three financial managers,

located in southeastern United States, with successful experience in conducting

corporate-responsible financial reporting to achieve financial stability. The potential

implications for positive social change are that financial managers may effectively

conduct corporate-responsible financial reporting to achieve financial stability. Business

organizations achieving financial stability may be in a financial position to make more

charitable donations to the local community.

Nature of the Study

Qualitative, quantitative, and mixed methods are the three research methods

available to researchers (Marshall & Rossman, 2016). Researchers use the qualitative

method to explore the what, why, and how of a phenomenon in its real-life setting (Yin,

2018). I used the qualitative research method because I explored the what, why, and how

of a phenomenon in its natural setting, which is corporate-responsible financial reporting.

Quantitative researchers examine the relationship between variables, using measuring

techniques to analyze the data and incorporating controls to ensure validity (Saunders et

al., 2016). Quantitative researchers also establish clear questions and hypotheses

(Saunders et al., 2016). I did not select the quantitative method for this study because I

did not examine relationships among variables using statistical analyses through

hypotheses testing. Researchers using the mixed methods use a combination of

qualitative and quantitative methods (Yin, 2018). I also did not select the mixed method

for this study because there were no hypotheses to test and numerical data to evaluate in

this study.

I considered the following research designs for the study: narrative,

phenomenological, ethnographic, and case study. Researchers use the narrative design to

obtain participants’ experiences through participants’ personal stories in an open,

interpretative way that is sequential and nonstructured (Carriger, 2013; Saunders et al.,

2016). I did not use the narrative design because the purpose of this study was not on

participants’ experiences, nor did it describe through their personal stories, in an open,

interpretative way. The phenomenological design is a form of interpretivism because the

researchers’ goal is to obtain participants’ lived experiences about phenomena to

understand meanings and gain insights (Prowse & Camfield, 2013; van Manen, 2017). I

did not select the phenomenological design for this study because I did not study the

personal meanings of participants’ lived experiences. Researchers use the ethnographic

design to conduct an in-depth exploration of the social and cultural aspects of a

community (Testoni et al., 2017; Saunders et al., 2016; Venkatesh, et al., 2013). I did not

select the ethnographic design because the focus of my study was not to explore the

social and cultural aspects of a community. Researchers use the case study design to

address real-world business and management problems related to business practices

(Saunders et al., 2016). Researchers also use the multiple case study design to investigate

a phenomenon in-depth within the participants’ environmental context and triangulate

data to validate findings (Ridder, 2017). Researchers use the multiple case study design to

explore the what, why, and how of a phenomenon in its real-life setting (Yin, 2018). I

used the multiple case study design because I explored the what, how, and why of a

particular phenomenon which, for this multiple case study, was exploring strategies

financial managers used to effectively conduct corporate-responsible financial reporting

to achieve financial stability.

Research Question

What are the strategies financial managers use to effectively conduct

corporateresponsible financial reporting to achieve financial stability?

Interview Questions

1. What strategies did you use to effectively conduct corporate-responsible

financial reporting to achieve financial stability?

2. How did your employees respond to the strategies you used to effectively

conduct corporate-responsible financial reporting to achieve financial

stability?

3. What modifications, if any, did you apply to any strategy you used to

effectively conduct corporate-responsible financial reporting to achieve

financial stability?

4. What policies have you used to effectively conduct corporate-responsible

financial reporting to achieve financial stability?

5. What were the key barriers to implementing strategies to effectively

conduct corporate-responsible financial reporting to achieve financial

stability?

6. How did you overcome the key barriers to implementing strategies to

effectively conduct corporate-responsible financial reporting to achieve

financial stability?

7. What else would you like to add about strategies to effectively conduct

corporate-responsible financial reporting to achieve financial stability?

Conceptual Framework

I used the International Accounting Standards Board’s (IASB) framework as my

conceptual framework for this study. The 2010 IASB framework includes a concept of

financial performance where changes in assets and liabilities are measurable (Van Mourik

& Katsuo, 2018). Financial experts use the IASB framework to explain the fundamentals

of financial reporting and the importance of these reports containing accurate information

related to a company’s financial status (Van Mourik & Katsuo,

2018). The International Accounting Standards Committee (IASC) was established in

1973 by 14 accountancy bodies in seven countries (Van Mourik & Katsuo, 2015). In

2010, the IASB took the core fundamentals from the IASC and formed its own financial

reporting framework. Researchers used the IASB to form a two-step process to drafting a

conceptual framework. The first step was to establish the objective of general-purpose

financial reporting. The second step was to construct the framework to ensure that

financial reporting information produced would be a true financial picture of the

organization’s financial status (Van Mourik & Katsuo, 2015).

The IASB framework applied to this study because the IASB framework includes

an outline to effectively conduct corporate-responsible financial reporting. In addition,

the IASB framework applied to this study because financial experts used the IASB

framework to explain the fundamentals of financial reporting and the importance of these

reports containing accurate information related to a company’s financial stability, as Van

Mourik and Katsuo (2015) recommended. Corporate-responsible financial reporting is a

large part of a company’s ability to achieve financial stability (Van Mourik & Katsuo,

2018). I selected the IASB framework to serve as a foundation to understand strategies

financial managers used to effectively conduct corporate-responsible financial reporting

to achieve financial stability.

Operational Definitions

Financial reporting: Financial reporting is the process of providing important and

accurate information to investors to make sound financial decisions, avoiding financial

fraud (Mankin et al., 2017).

Financial stability: Financial stability is a characteristic of a financial system that

eliminates financial imbalances that emerge in the financial markets as a result of

significant adverse and unforeseeable events (Arifin et al., 2021).

Assumptions, Limitations, and Delimitations

Assumptions

Assumptions are statements that the researcher believes to be true and need to

conduct the research, but they cannot always be proven (Mattila et al., 2021). I assumed

that the data collected during the interviews would accurately reflect the participants’

experiences. I also assumed that the use of the concept of corporate-responsible financial

reporting was universal across all industries, cultures, and organizations. I also assumed

that the data collected from participants would assist me in answering the overreaching

research question for this study. Additionally, I assumed that financial managers in the

accounting and finance industry would be willing to participate in the study and that

documents for review would be accessible.

Limitations

Limitations are potential study weaknesses that a researcher may encounter and is

unable to address (Babbie, 2007). One of the limitations that I encountered when

conducting this study was the region that I selected for this study. I recruited participants

located in southeast United States. The selected region did not have a large selection of

established financial managers. The sample size of three financial managers was thus a

limitation of this study. Conducting a study with only a few financial managers prevented

the application of findings across the financial accounting industry. Additionally, some

financial managers chose not to participate in the study. Furthermore, the time limit for

interviews was another limitation of this study.

Delimitations

Delimitations are boundaries that researchers impose to narrow the scope of a

study (Babchuk 2019). In this study, I interviewed three financial managers meeting the

participation criteria I established in this study. This was a delimitation because the target

population consisted of three financial managers, located in southeastern United States,

with successful experience in conducting corporate-responsible financial reporting to

achieve financial stability. Participants were located in southeastern United States, which

was a geographic delimitation. However, participants were able to provide in detail

specific sustainable strategies.

Significance of the Study

This study may be valuable to businesses by providing financial managers with

different strategies to effectively conduct corporate-responsible financial reporting to

achieve financial stability. Conducting corporate-responsible financial reporting

effectively allows financial managers to achieve financial stability that supports longterm

growth, provide a competitive advantage, and promote profitability (Dong et al., 2018;

Sherman & Young, 2016). This study may contribute to the body of knowledge on

corporate-responsible financial reporting to achieve financial stability. Financial

managers integrating financial stability into the long-term business strategy may provide

a competitive advantage (Lacy et al., 2012). Financial managers conducting

corporateresponsible financial reporting have a positive effect on the financial

performance of their businesses (Im & Nam, 2019). The implications for positive social

change of this study was that financial managers may have access to insightful

information from expert financial managers to effectively conduct corporate-responsible

financial reporting to gain financial stability, which may allow business organizations to

increase their profits that may translate into an increase in charitable donations made to

community-based organizations. Financial managers engaging in corporate-responsible

financial reporting may also experience an increase in self-worth and self-dignity (Judd,

2017).

A Review of the Professional and Academic Literature A literature

review involves selecting, reading, analyzing, and evaluating available published

documents directly related to the main topics and subtopics that contains information,

ideas, data, and evidence written by accredited scholars and researchers (Bodolica &

Spraggon, 2018). The literature review supports a research topic or problem by providing

qualified data from various sources. The literature review is helpful because it gives

current researchers a starting point on their research process. It eliminates redundant

work by providing research process results from other scholars and researchers (Shelton

& Flint, 2020). Researchers develop an argument for their studies by conducting a review

of literature that extends existing knowledge and fills existing gaps of scholars’ work.

I reviewed scholarly literature on corporate-responsible financial reporting

published in various journals and seminal scholarly books. The primary source utilized

throughout this study for obtaining journal articles was Google Scholar, which is linked

to the library website of Walden University. The Walden University’s library is a vital

resource for doctoral students to gain access to various databases, including Business

Source Complete, ABI/INFORM Complete, Academic Search Complete, and ProQuest

Central. I also accessed various open journals to obtain literature related to

corporateresponsible financial reporting. There were occurences when I obtained

demographics, industry statistics, and regulations information about corporate-

responsible financial reporting.

I used filters to limit the results from the chosen keywords and phrases. These

filters included limited keywords, a specified period, and specific databases. When using

Google Scholar, I gave preference to articles published in or after 2017 to ensure the

chosen literature is current and in accordance with Walden University’s doctoral study

guidelines. Second, I selected literature that was available in the Walden University

Library. The keywords and phrases I used in my search were corporate stability, financial

reporting, financial managers, debt control, business failure, qualitative research,

financial stability, stable companies, financial tools, and effective leadership. Crossref

and Ulrich’s Periodicals Directory are tools to verify that literature is peerreviewed. There

are 161 references in this study; 153 of the references are scholarly peerreviewed articles

representing 95% of the total. In addition, there are seven books representing 3%, one

dissertation representing .5%, and three nonpeer-reviewed references representing 1% of

the total. The total references published within the 2017– 2021 period are 107, which is

66% of the total references. The literature review section includes 61 references. The

publication date for 43 of these references is within the 2017–2021 period, representing

70% of all references included in the literature review section. All references are peer-

reviewed articles and excludes websites and nonscholarly articles.

A literature review involves selecting, reading, analyzing, and evaluating available

published documents directly related to the main topics and subtopics that contains

information, ideas, data, and evidence written by accredited scholars and researchers

(Bodolica & Spraggon, 2018). The literature review supports a research topic or problem

by providing qualified data from various sources. The literature review is helpful because

it gives current researchers a starting point on their research process. It eliminates

redundant work by providing research process results from other scholars and researchers

(Shelton & Flint, 2020). Researchers developed an argument for their studies by

conducting a review of literature that extends existing knowledge and fills existing gaps

of scholars’ work. The content of this literature addressed the criticality of financial

analysis, role of leaders within those companies deemed financially stable, and

importance of debt control.

The literature review section has multiple subsections. The introduction included

strategy information for finding the literature and peer-reviewed articles and publication

dates available for a topic. The focus of the next subsection was to discuss the way the

literature and research question coincide with each other and provide a detail description

of the purpose of the study. The themes I discussed throughout this literature review were

corporate-responsible financial reporting to achieve financial stability, financial reporting,

and debt control. Throughout the literature review, I reviewed and analyzed different

viewpoints and relationships between previous research and findings with this study.

The first theme was corporate-responsible financial reporting to achieve financial

stability, which included a critical analysis and synthesis of the conceptual framework

that I used in this study, the IASB framework, followed by a discussion of supporting and

contrasting theories from relevant literature on the topic of corporate-responsible

financial reporting. Financial stability should be applied throughout every facet of a

company’s life cycle and the responsibility of managers is to pay attention to the

company’s financial results and environmental and social issues (Lee & Raschke., 2020).

According to Wang (2019), a company’s failure not only affects its entire existence, but it

is also costly to owners, investors, creditors, and employees. Performance assessment is

critical as well as the ability for management to be able to predict failure (Lee & Raschke

2020).

The second theme, financial reports, starts with a brief analysis of the expansion

of corporate-responsible financial reporting. I debate common matters related to the

construct as well as the various definitions, antecedents, and consequences of

corporateresponsible financial reporting. The section concludes with a discussion of

corporateresponsible financial reporting. The third and final theme was debt control. The

theme includes a general discussion about the importance of managing debt and the effect

it has on the success of a company. Debt control plays a vital part in the financial stability

of a company (Geraschenko, 2018).

The strategy for retrieving data from existing literature required the use of

keywords and phrases in the databases listed above. I used filters to limit the results from

the chosen keywords and phrases. These filters included limited keywords, a specified

period, and specific databases. When using Google Scholar, I gave preference to articles

published in or after 2017 to ensure the chosen literature is current and in accordance

with Walden University’s doctoral study guidelines. Secondly, I selected literature that

was available in the Walden University Library. The keywords and phrases I used in my

search were corporate stability, financial reporting, financial managers, debt control,

business failure, qualitative research, financial stability, stable companies, financial

tools, and effective leadership. Crossref and Ulrich’s Periodicals Directory are tools to

verify that literature is peer-reviewed. There are 161 references in this study; 153 of the

references are scholarly peer-reviewed articles representing 95% of the total. In addition,

there are seven books representing 3%, one dissertation representing .5% and 3

nonpeerreviewed references representing 1% of the total. The total references published

within the 2017-2021 period are 107, which is 66% of the total references. The literature

review includes 61 references. The publication date for 43 of these references is within

the 2017-

2021 period, representing 70% of all references included in the literature review section.

All references are peer-reviewed articles and excludes websites and non-scholarly

articles.

Application to the Applied Business Problem

The purpose of this qualitative, multiple case study was to explore strategies that

financial managers used to effectively conduct corporate-responsible financial reporting

to achieve financial stability. Developing an understanding of such strategies required a

qualitative approach, more specifically an exploratory case study. An exploratory case

study asks the what questions about a study to gain a better understanding of an

underlying problem (Yin, 2018). The findings from this study provide insight into

corporate-responsible financial reporting from financial managers’ perspectives. The

finding also provides insightful information for financial managers to incorporate into

their day-to-day financial reporting procedures. Further, the findings from this study may

provide an outline for managers to produce ethical financial reports. Industry-appropriate

strategies might equip financial managers with the skills to improve corporateresponsible

financial reporting to achieve financial stability. The findings from the study might

improve business practice by identifying and implementing practices that lead to

financial stability, increased productivity, organizational competitiveness, and

profitability (White, 2021). The potential implications for positive social change include

financial managers effectively conducting corporate-responsible financial reporting to

achieve financial stability. Business organizations achieving financial stability may be in

a financial position to make more charitable donations to the local community.

International Accounting Standards Board’s Framework

The IASB includes the fundamentals of financial reporting and the importance of

these reports containing accurate information related to a company’s financial status

(Pelger, 2020). One of the main goals of the IASB framework is to develop a set global

accounting standard that compares financial statements across the world (Mukai, 2017).

The IASB has established a worldwide framework for business accounting (Biondi,

2017). The IASB and the FASB want to ensure that they ae both in compliance with the

GAAP laws as it pertains to the legal terms of accounting (The International Accounting

Standards Board, 2021). The IASB framework disallows over reporting and

underreporting of assets, income, and liabilities in financial reporting (Bloom, 2018). The

IASB has a framework that includes standards for measuring financial operations in

financial statements to assist individuals who rely on published financial statements in

decision-making (Pelger, 2020). Researchers used the IASB framework to conduct

corporate-responsible financial reporting to justify new lease accounting requirements

(Kabir & Rahman, 2018). The IASB standards went through five phases of establishment.

The financial reporting phase ended in 2002 (Nour et al., 2013). Many advantages exist

to utilizing IASB standards, including that allow accounting professionals to gain

credibility and to facilitate the understanding of financial data comparisons (Pelger,

2020). The importance of reporting accurate data is a key factor in utilizing the IASB

framework.

Nour et al. (2013) discussed the global financial and economic crisis. The lack of

oversight and transparency were two of the factors that aided in the global financial

crisis. Transparency of financial documentation could have prevented errors in the

financial reporting (Jin, et al., 2021). Enron, Xerox, and Worldcom were a few of the

organizations that came under fire due to their lack of financial transparency, which

eventually led to a financial crisis. The IASB standards were under fire for their role in

causing and facilitating the financial crisis (Nour et al., 2013). Although the IASB

framework is the guideline to follow, it is important that the information reported is

unbiased and accurate to ensure that business managers have access to raw, unfiltered

information to make sound financial decisions. The IASB framework requires financial

reporting documentation to contain truthful, auditable information (Craig et al., 2017).

Government officials researched these companies to determine the legitimacy of their

activities. The conclusion was that business managers from these companies provided

fraudulent information in their financial statement and, consequently, the issue of

corruption emerged.

The mission of The International Association for Accounting Education and

Research (IAAER) is to encourage global excellence in education related to accounting

and maximize development of accounting principles (Gordon et al., 2015). The Brazilian

public university follows the IASB framework when teaching accounting to develop the

skills and competencies needed for learning the IFRS (Costa et al., 2018). Gordon et al.

(2015) researched the IASB framework and provided their own commentary on the IASB

structure as a conceptual framework for financial reporting. They responded to

preliminary reviews proposed by IASB. Gordon et al. provided supporting documentation

of previous scholarly written literature that supported their viewpoint of the IASB

framework. Researchers should incorporate the IASB framework when producing

financial documentation (Moore, 2017). The primary focus of Gordon et al.’s research

study was to identify whether the concepts processed by the IASB discussion paper fit

into a cohesive and complete framework in a matter, which was internally consistent

(Gordon et al., 2015). The framework states that the objective of financial reporting is to

provide financial data about a reporting entity that is useful to existing and potential

investors, lenders, to other creditors who make financially related business decisions

(Gordon et al., 2015). IASB framework serves as a blueprint for investors to establish

internal controls that minimize financial risks and check the accuracy of financial

statements (Al-Dmour, Abbod, & Al-Dmour, 2018).

Gordon et al. (2015) analyzed the IASB framework and found that the framework

should include all assets and liabilities to generate accurate financial reporting. Financial

reporting must include transparent and accurate data (Barlev et al., 2017). Gordon et al.

also discovered that many researchers suggest that non-GAAP earning reports are a better

summary measure of performance than GAAP earnings. The IASB Board agreed that the

users of financial statements are only interested in the profit-and-loss bottom line

(Gordon et al., 2015). However, the scholarly literature that Gordon et al. used allowed

them to reveal that financial statement users select the components of earnings that are

most useful in forecasting cash flow and earnings. Financial statements should include all

relevant information to ensure financial reporting produce accurate results (Alozie, 2020).

This fact does not necessary pertain to the bottom-line number. Each financial person

may select different sections of the financial statement to compute their numbers.

While IFRS are considered principle-based accounting standards, U.S. accounting

standards are considered rules-based accounting principles (Baranek, 2020). Shifting

from rules-based accounting principles to principles-based accounting standard require

more expertise from financial managers with experience in these areas. Principle-based

accounting relies more on the judgment of the financial managers than following a set of

rules (Chandra & Azam, 2019). Financial managers must have an extensive managerial

experience level to make decisions while following the principle-based accounting

method (Bjornsen & Fornaro, 2019). IASB and FASB are working together on several

joint ventures to consolidate their principles to make them more aligned with each other

(McCarthy & McCarthy, 2014). IASB and FASB frameworks both contain inconsistences

(Gornik-Tomaszewski & Choi, 2018). Rules-based accounting is more detailed and

specific in applying quantitative accounting standards. Principle-based accounting

standards are more aligned with GAAP principles and follow a consistent framework

method (Vichitsarawong and Eng, 2020). Principle-based accounting requires financial

statement preparers and certified auditors to determine whether a company is in

accordance with GAAP principles. Vichitsarawong and Eng (2020) studied a select

number of financial managers to determine whether a principle-based accounting

standard, compared to rule-based accounting standard, altered their revenue-recognition

decisions.

The sample size for principle-based accounting standards versus rules-based

accounting standards consisted of 13 financial experts and 5000 participants. It took the

financial experts 20-30 minutes to complete the questions compiled by McCarthy and

McCarthy (2014). Once the 13 financial experts reviewed the questions to make sure they

were significant to the study, they selected 5000 participants and sent the questionnaire

out in increments of 1250. After two weeks of sending the questionnaires, the experts sent

a follow-up emails to determine the status of the questionnaire. The response rate was

only 2.5% but all the participants were high-level financial managers. To conclude, the

personal interpretation of the accounting principles, whether rules-based or

principlebased, swayed the outcome of the financial managers’ answers to the questions.

Although each participant was given restricted information to make their revenue-

recognition decision, the internal controls were not solid enough to determine whether the

managers

“actually” followed the rules-based accounting standards or the principal-based

standards. McCarthy and McCarthy did conclude that it is extremely important for

financial managers to follow an accounting framework, regardless of type, when making

financial decisions regarding an organization.

Over the 1974-2014 period, IASB has been adopted as one of the core accounting

frameworks utilized by successful companies (Botzem, 2014). Following the IASB

framework plays a critical and efficient role in standardizing accounting principles in an

organization. The IASB framework has been adopted in more than 100 countries

(Botzem, 2014). IASB was one of the accounting frameworks that were criticized during

the 2007-2009 financial crisis (Botzem, 2014). Most of the IASB critics came from

Europe (Botzem, 2014). One of the main issues that European countries had with IASB

was the lack of technical expertise, as they felt that IASB’s framework did not have

enough accountability to assess a company’s financial state (Botzem, 2014). A group of

accountants with auditing experience dissected the IASB framework while auditing a

company to determine the strengths and weaknesses. The accountants also wanted to

assess whether the IASB framework was a solid structure to stand up against the rest

(Botzem, 2014).

One of the drawbacks of utilizing the IASB framework was the lack of technical

expertise. The accounting board felt there was not enough technical support for a

company to follow the structure. The accounting board felt there was a lack of support

related to people possessing the knowledge to help if an organization needed further

assistance with an IASB issue. After analyzing the framework, the accountants

discovered that the IASB framework had changed its organizational setup and has

evolved into an efficient and robust structure (Botzem, 2014). The company under review

followed the IASB framework and was able to pass its audit and turn a project for the

fiscal year audited. After all of the public backlash as being an inadequate accounting

framework for companies to follow, the IASB board listened to the complaints and

strengthened its structure and became one of the most reliable accounting models to

adopt for financial decision-making (Botzem, 2014).

Hansen (2011) utilized the IASB framework to determine the relationship

between lobbyists, their activity, and success. The term lobbyist defined in this article

was all parties that submitted comment letters in response to IASB exposure drafts

(Hansen, 2011). The IASB exposure drafts were sent out to random companies that

utilized the IASB framework. Hansen felt that lobbying success is related to the lobbyist

ability to provide accurate financial information to the IASB. After much research,

Hansen discovered that accounting principles differ across legal and economic

organizations. Hansen demonstrated that IASB was a robust framework to utilize in an

organization and that the IASB accounting method produces accurate and reliable

financial reporting when the information used was raw and unfiltered.

The data for this research study were collected from lobbyist comment letters on

5% exposure drafts issued by the IASB (Hansen, 2011). There were two measures

utilized in this study to transfer information to the IASB. Hansen (2011) analyzed the

proforma content of the comment letters submitted. Hansen realized that reliability and

accuracy played a vital role in the information provided. Researchers agree that financial

information must be reliable to produce accurate results (Dennis, 2019). It was important

for the lobbyist to provide raw, unfiltered information to ensure the IASB accounting

methodology reported accurate information. The financial contribution was another

measure analyzed in this framework. Hansen mirrored the IASB framework when

analyzing the financial reporting for lobbyists that responded to the IASB exposure draft.

Although it concluded that, the lobbyist financial information was accurate and in

accordance with government regulations, Hansen could not report that this was the best

accounting framework to use. However, Hansen was able to prove from analyzing the

financial statements that following the IASB accounting method was beneficial and

profitable for the lobbyists’ organization.

Bandara & Falta (2021) discussed the importance of following the IASB

framework and providing accurate financial reporting because these factors play a key in

role in investors’ willingness to take the risk and invest in a company. Mohamed,

Yasseen, and Omarjee (2019) studied various South African’s financial reporting systems

for small and medium-sized entities. By following the IASB framework, the audited

companies minimized their financial burdens. Bandara & Falta explained key issues

surrounding the IASB framework and requirements for the IASB’s new revenue standard.

Bandara & Falta argued that investors could benefit from relying on the IASB framework

when determining the financial risk of a company. Bandara & Falta explained how

investors utilize financial reports as an instrument to determine in which company they

will invest their money and time. Investors need data to compare resources, claims, and

performance of its investment alternatives. Bandara & Falta researched the importance of

following the IASB framework because it generates the information needed for investors

to decide when to invest, hold existing investments, and sell. Financial statements have to

be more of a communication tool rather than a compliance exercise. The IASB reflects

both the characteristics of an item and how it can be used by an entity to generate strong

cash flows.

Tokara (2015) examined two banks that applied for a loan. While Bank A’s

business model was to hold and collect the interest and principle on the loan, Bank B

bundled the loan with other loans in a securitization transaction. Tokara compared the

bank’s financials by following the IASB framework model. Bank A classified the loan at

amortized cost and Bank B measured the loan at fair value. The result would determine

which bank would be the most profitable investment for the investor. Although the loan is

measured in two different ways, the investors can compare how efficiently and

effectively management has used the loan in its business (Tokara, 2015). By utilizing the

IASB framework, the financial statements became a more useful communication tool,

providing a better basis for investors to make their choice between investing in Bank A or

Bank B (Tokara, 2015).

Crump (2015) discussed the standard leasing section of the IASB framework and

the importance of companies showing transparency when reporting these items on the

balance sheet. Crump discussed several different companies’ financial reports and the

way they record their big leasing items on their financial reports. Crump explained the

importance for organizations to reveal the liabilities of leasing items as a separate line on

their balance sheet so that each company’s financial leaders could see the actual picture

of liabilities regarding their business. Crump concluded that most companies tend to hide

their leased items in the balance sheet. Hiding a company’s leased equipment is an

unethical practice and it provides false information to investors and auditors. Unethical

reporting provides little guidance to auditors when forecasting financial risk

(Smieliauskas, Bewley, Gronewold, & Menzefricke, 2018). The three companies Crump

researched were Maersk Group, British Airways parent IAG, and Leaseurope. Crump

followed the IASB framework as a blueprint to dissect the financials of the companies to

determine if the companies were recording their lease liabilities correctly on the balance

sheet. Each company was instructed to utilize the IASB framework when recording their

lease liabilities.

Maersk Group was very supportive of changing the way the lease liabilities are

recorded (Crump, 2015). The challenge involved distinguishing the different types of

leasing structures, as they relate to the IASB framework. The Maersk Group understood

the importance of revealing its lease liabilities as a line item, as oppose to embedding the

number in other liabilities on the balance sheet. British Airways parent IAG’s leaders

were not open to changing the way they recorded their lease liabilities on the balance

sheet (Crump, 2015). IAG financials were always solid and they successfully passed their

yearly audits. IAG felt that there was not a need to adopt a new practice. The Leaseurope

organizational leaders felt that adopting the IASB framework for leasing items is an

unnecessary hurdle to adopt (Crump, 2015). Leaseurope’ leaders felt that this framework

would be an unnecessary obstacle to the sales process (Crump, 2015). Ninety-six percent

of the lease value is made up of property value and only 4% of this total balance will be

on the balance sheet (Crump, 2015). Leaseurope’s leaders felt that adding this line as a

separate liability on the balance sheet would do nothing for investors looking to invest in

their company.

Whitehouse (2014) compared the IASB and FASB frameworks, as they relate to

revealing credit losses on financial reporting. The focus of this research study was to

compare each framework and how a company would benefit when reporting its losses.

The timeliness of loss recognition has changed in Europe bank financial statements post

incorporating the IASB framework (Manganaris, Spathis, & Dasilas, 2016). The

international accounting rules have changed in terms of standards on how to report

financial instruments in financial reporting. The IASB issued a new rule on financial

instruments (Whitehouse, 2014). The biggest change in the IFRS 9 rule is the ability to

report credit losses. The IFRS will allow stakeholders to require firms to assess the

creditworthiness of credit instruments and to provide a model that estimates expected

losses for the next 12 months (Whitehouse, 2014). The financial results from utilizing the

revised IFRS9 standard will allow a company to estimate and book an allowance for the

lifetime expected loss (Whitehouse, 2014). Investors will benefit from this new rule

because the rule will allow investors to make better business decisions based on financial

facts and not assumptions.he FASB plans to eliminate the 12-month estimate and to

require individuals to assess instruments for their lifetime losses from the beginning and

book the allowance immediately (Whitehouse, 2014). The analysts preferred this method

because they felt it involves less judgment, subjectivity, and likelihood for interpretation

differences (Whitehouse, 2014). The FASB revisions required more management

discussions, as oppose to relying on results from the framework such as the IFRS 9. An

analyst in this study explained that the difference between the IASB and FASB is the

recognition timing of expected losses. While the IASB framework allows companies to

estimate losses over a span of a year, the FASB framework requires individuals to record

the loss when it happens. The analyst discussed in the research study discussed the

importance of understanding both standards and the way they can affect their businesses’

reporting procedures and internal control processes (Whitehouse, 2014).

Hamilton (2014) examined the FASB’s and IASB’s revenue recognition section

related to financial reports. Hamilton researched a transition group chosen by the FASB

chair, Russell Golden, and IASB Vice-Chair, Ian Mackintosh (Hamilton, 2014).

Management selected the transition group, which consisted of financial preparers,

auditors, and users of financial statements across many industries, geographic locations,

and public and private companies (Hamilton, 2014). The primary agenda for the chosen

group was to address the issues related to revenue recognition of intellectual property and

purpose of performance requirements (Hamilton, 2014). The sampling team analyzes and

determines at which point a company’s revenue on the financial statement should be

recorded as gross versus net at the time accountants record the journal entry. Management

sends the selected group to various reporting companies to research and determine where

these companies are in the revenue recognition implementation process and determine the

type of roadblocks each company encounters when following the new process (Hamilton,

2014).

The transition team received 28 common questions from the selected reporting

companies related to the new revenue recognition standard. The questions relate to

judgments, audit issues, internal controls, and SEC (Hamilton, 2014). The IASB adopted

the IFRS 9 as a new accounting standard. The IFRS 9 allows accountants to have a

logical approach for classifying financial assets driven by cash flow (Hamilton, 2014).

One of the purposes of the IFRS 9 is to remove some of the complexity associated with

certain accounting requirements. The IFRS leaders introduced the concept of prudence.

The purpose of prudence was to prevent companies from overstating their assets and

profits on the balance sheet. Prudence was an internal control for the IASB framework to

protect companies from committing this type of fraud. Hamilton concluded that the IASB

framework was an excellent framework to implement because the framework allows

companies to produce more accurate financial reporting.

Butler (2014) examined the IASB framework as it relates to concealing bank

losses. Butler researched bank processes and how bankers report their revenue losses on

their financial reporting documentation in Ireland, Britain, and the United States. The

banking crisis caused researchers to look closer into the financial institution market and

examine which factors resulted in the demise in some of the banks and the cause of the

problem. Two legal opinions were analyzed which related to the bank loss situation.

George Bompas stated that the UK’s Financial Reporting Council (FRC) claimed that

Ireland and Britain banks were in IASB compliance under the United Kingdom laws to

disclose losses (Butler, 2014). After Bompass had examined their financial reports, he

discovered that they were not in compliance. Martin Moore, a legal representative, found

some errors in Bompass’ findings but also felt that UK banks were not in compliance

with the IASB framework regarding the report of bank losses (Butler, 2014).

The primary focus of the IASB framework, as it relates to reporting bank losses,

was to report the revenue as transparently as possible. Transparency prevents the banks

from hiding substantial losses in other numbers on the balance sheet and income

statement. A British bank was able to hide $1.5 billion in losses by including its losses in

other financial numbers on their revenue report (Butler, 2014). This fraud and deceit

caused the bank to pay a hefty fine and later the bank closed. The IASB framework

created the standard prudence to prevent companies from hiding their losses. Investors

lose billions of dollars when banks manipulate their actual financial status. The financial

reports did not show an accurate picture of the banks’ financial position, which leads to

investors making bad decisions when investing their money. The investors involved in the

fraudulent Britain bank systems have taken legal actions against the banks (Butler, 2014).

Škobić (2016) discussed accounting regulations of financial reporting related to

small-, medium-, and large-sized entities. Škobić focused on the small- and mediumsized

entities (SMEs) and found that small- and medium-sized entities should have simpler

requirements when disclosing elements of their financial reporting. The IASB has created

a financial reporting standard that meets the needs and skills of small- and medium-sized

entities with no public accountability (Škobić, 2016). Škobić researched the Republic of

Serbia throughout the study. Although the requirements differ from largesized entities,

Škobić claimed that the less complex IASB requirements for SMEs do not affect the

transparency or quality of the financial reporting. The IFRS for SMEs’ financial reporting

is the same as large-scale companies, but this standard is being adjusted (Škobić, 2016).

The primary groups of people interested in reviewing SMEs’ financial statements

are suppliers, customers, banks, state, and employees (Škobić, 2016). Fewer people were

interested in reviewing financial statements for SMEs in relation to large-sized entities

where these groups of individuals, in addition to shareholders, investors, among others,

consider these financial documents very important. In 2004, the Republic of Serbia

implemented the IFRS for large-scale companies (Škobić, 2016). The Republic of Serbia

gained interest in adopting the IFRS framework for SMEs as cost savings. The

implementation reduced training cost and created favorable conditions for SMEs. The

research sample size consisted of 325 companies. The companies were categorized in

micro, small, middle, and large size. Using the modified IFRS framework for SMEs and

the large sized standard was beneficial for the micro-, small- and middle-sized entities.

Jaggi, Allini, Rossi, and Caldarelli (2016) discussed the way Italian companies

implemented the European Union’s (EU) mandated IFRS using accounting traditions,

ownership, and governance structure. Jaggi et al.’s primary goal was to create uniformity

in financial reporting across the country by following the IASB framework. The

European Council mandated the use of IFRS across the EU countries; however, the EU

was not 100% certain whether this order would provide uniformity in financial reporting.

Gordon et al. (2015) researched the IASB framework and provided their observation on

the IASB structure as a conceptual framework for financial reporting. The primary focus

of Gordon et al.’s research study was to identify whether the concepts processed by the

IASB discussion paper fit into a cohesive and complete framework in a matter, which

was internally consistent (Gordon et al., 2015).

While Jaggi et al. (2016) discussed the way the social, cultural, and business

environment affects the accounting systems in Italy, Gordon et al. (2015) felt that the

accounting process was solely affected by the financial stability of the company. Jaggi et

al. also focused on the way authors of research articles compared the old accounting

framework with the IASB framework. Jaggi et al. sought to determine if any new benefits

to adopting the new accounting framework emerged to adopt the new accounting

framework. Gordon et al. only examined the IASB framework and did not research past

accounting frameworks to see if there was a difference. Although Jaggi et al. felt that the

EU followed accounting traditions, ownership, and governance structures to implement

the IASB framework and Gordon et al. use their knowledge to examine the IASB

framework, both Jaggi et al. and Gordon et al. concluded that transparency and

uniformity play a vital role when creating accurate financial reporting. Gordon et al. and

Jaggi et al. both discussed the challenges of utilizing the IASB framework but felt it is

beneficial to the companies to continue to follow the accounting framework.

Other Supporting and Contrasting Theories

The accounting theory consists of assumptions and methodologies used in various

studies to define and explain principles for financial reporting (Dennis, 2019; Gaetani &

Fenner, 2019). The accounting theory framework minimized fraud, errors, and

misappropriations of corporate assets (Dennis, 2019; Gaetani & Fenner, 2019). The

conceptual framework of accounting includes fundamental principles of accounting

(Dennis, 2019). The individuals in charge of IASB and FASB are committed to the

development of the accounting theory (Dennis, 2019). The accounting method had a

significant influence on accounting practices and teaching, which led to the

standardization of the accounting, practices (Hoffman, 2016). Understanding the way

accounting theories fit into a conceptual framework helps managers, investors, and

creditors implement both accounting principles and financial accounting into their

business model.

Schwarz et al. (2015) argued that the accounting framework affects the financial

stability of central banks. Monetary policy, financial stability, and banking supervision

are all important factors that influence the central bank organization (Schwarz et al.,

2015). Contrary to the IASB framework, creditors are primarily concerned with asset

protection and determination of dividend payments, which affects profits, assets, and

liabilities (Hoffman, 2016). The FASB conceptual framework replaced the accounting

theory as a basis for the accounting standards in the United States (Hoffman, 2016).

Then, the IASB framework became the preferred framework due to the substance of

accounting principles. Ionesco (2017) discussed relationship conflict when companies

utilized the accounting theory framework. The lack of transparency revealed in the

financial statements caused the investors to retrieve their funds and seek other

opportunities.

Sunder (2015) discussed the different risks in accounting and the importance of

choosing an accounting theory when preparing financial reports. Decision-making

processes and accountability were two main factors that Sunder discussed that affect the

accounting role in an organization, helping managers make important decisions for the

financial stability of an organization. Qi et al. (2016) discussed the theoretical and

empirical research theory as it relates to accounting. Qi et al. felt that accounting training

played a major part in how accounting researchers perceive the accounting theory. Qi et

al. showed the lack of accounting training in doctoral schools as it relates to the real

world. The arguments provided in the classes were not direct correlations to the doctoral

student’s actual work life. The difference between the two theories caused students not to

be able to relate the book theory to their job. Pietsch and Messier (2017) focused on

behavioral accounting and how individuals’ beliefs and the way they adapt to time

pressure affects their financial judgment and decision-making process. Pietsch and

Messier based their research on Hogarth and Einhorn’s (1992) belief-adjustment (BA)

model. Using the BA model, Pietsch and Messier analyzed an individual’s work

experience and task complexity. The pressure of time affected the outcome of a person’s

decision-making process. For example, auditors must analyze a large amount of data in a

specific amount of time. In this environment, time plays a significant role in the

completion of a project. The pressure of completing a job in a short-time frame alters the

decision-making process. If time was not a significant factor, the individual could assess

the data with a clear mind without being on a rush to finish.

Sunder (2015) provided information to the investors to give them a reliable,

unbiased evaluation of the company’s finances and, from that information; the investors

make an educated decision on whether they deem the organization profitable to invest. Qi

et al. (2016) showed that the lack of training is a major downfall in analyzing accounting

theory. Theorists explain one section of the report, master it, and draw the conclusion

based on their findings. Empiricists focus on multiple parts of a report, compare and then

give their scientific discoveries. Pietsch and Messier (2017) discussed the way the BA

model contains the way time pressure affects an individual’s performance in detail.

Researchers use the BA model to show how short deadlines can arouse a person leading

to either anxiety or motivation (Pietsch & Messier, 2017). People respond to pressure in

different ways. While pressure may motivate some people, pressure could cause another

person to have an anxiety attack. In this case, time pressure affects both individuals’

thinking process. Time pressure has advantages and disadvantages.

Financial experts use the IASB framework to explain the fundamentals of

financial reporting by using a two-step process to draft the conceptual framework (Van

Mourik & Katsuo, 2018). The financial experts use the same methodology to create their

financial data. Sunder’s (2015) accounting theory is not as structured. Sunder felt that the

financial expert’s decision-making skills affected the outcome of the financial data.

Sunder did not speak of a specific accounting framework to mirror. Qi et al. (2016)

discussed the way empirical and theoretical theory affects the financial reporting data

created by the financial analyst. Pietsch and Messier (2017) mirrored the BA model and

examined the way behavioral factors of an individual affect their financial

decisionmaking skills.

Andersen, Zuber, and Hill (2015) researched Haidt and Joseph’s (2004) moral

foundations theory. In the theory, Haidt and Joseph speculated that people rely on five

concerns when making moral decisions. The five concerns are care/harm,

fairness/cheating, loyal/betrayal, respect/authority, and purity/degradation (Andersen et

al., 2015). Andersen et al. suggested that a person’s intuition leads to moral judgment, as

opposed to reasoning. Weisner (2015) discussed the construal level theory (CLT). CLT is

a behavioral framework that accounting researchers use to abstain from biases in the

decision-making process and to obtain an outline used to gain a deeper comprehension of

judgment in distance-affected environments (Weisner, 2015). Weisner studied how CLT

can affect the accounting research process. The CLT framework included an in-depth

outline of ways an organization can gain financial stability. Ionesco (2017) discussed the

economic theory. The economic theory includes an explanation of business models,

financial reporting, firm existence, and how companies determine whether they will

conduct in firm or market transactions. Organizational leaders used the business model of

an organization to provide a blueprint of how an organization makes money or anticipates

making money. Organizational leaders used the business model to offer the target market

of the group and to answer the how, when, and why questions related to the business.

Andersen et al. (2015) interviewed several managers in a selected region to

determine various factors that affect their decision-making process. Andersen et al. also

interviewed college students studying accounting to gain a better understanding of future

business leaders’ decision-making skills in business-related situations. Andersen et al.

interviewed men and women in their research study and found that participants’ morals

and ethics affected the outcome of their business decisions. Andersen et al. showed the

importance of ethical/moral education in the accounting world to empower organizational

leaders to make decisions to sustain business operations. Weisner (2015) mentioned the

importance of using concrete language in financial reporting rather than abstract language

when mirroring the CLT framework. Concrete language included concise, accurate data

for investors to review to determine whether the company promotes their financial gains.

Weisner discussed the importance of developing a culturally sensitive business plan.

Organizational leaders must have a clear concise outline of their business plan and show

the strategies for generating a profitable bottom line. This action could be the deciding

factor on whether a potential investor would invest in an organization. According the

economic theory, internal processes contribute to a firm’s existence (Ionesco, 2017). Lee

et al. (2020) explained how business leaders use financial reporting to show whether the

business plan would work to produce the anticipated revenue. Business leaders used

financial reporting to analyze the organization’s data to determine if the business was

cost-effective to sustain it. Business leaders examined the financial reports to determine if

the firm should conduct in firm or market transactions. Business leaders used cost to

drive the way an organization consumes its inventory. Business leaders made decisions to

produce the most profit.

Financial Reports

Sarıoğlu (2017) discussed financial reporting issues when a company does

international business. It was common for United States companies to have businesses in

different countries. Financial reporting became difficult because different countries have

their specific accounting laws. A company must follow the GAAP laws that pertain to

that particular country. Tănăsescu (2017) discussed the importance of accurate financial

reporting. Tănăsescu claimed that managers must understand the fundamentals of the

accounting information. Tănăsescu researched a company in Romania and found that the

better the managers understand accounting fundamentals, the better managers will be able

to manage their business. Mankin, et al., (2017) discussed the importance of financial

reporting. The goal of financial reporting is to produce useful financial information for

decision-making (Mankin et al., 2017). Investors rely on the accuracy and clarity of

financial information. Investors make business decisions to determine potential ways to

expand their portfolio.

Newhard (2019) discussed the importance of a company producing accurate

financial reporting. Financial reports should include all expense, liabilities, and revenue.

Companies commit fraud when they intentionally leave out financial information to

inflate their profit statements. Although it is profitable for companies to do business

abroad, managers must ensure they have rules in place to address these recurring issues.

Tănăsescu (2017) followed the IASB framework to dissect the Romanian financial

reporting data. Business leaders use the IASB framework to ensure transparency,

accountability, and efficiency of the financial market. Tănăsescu concluded that following

the IASB framework helped the Romanian company end its year with a profitable income

statement and balance sheet. Mankin et al. (2017) discussed the IASB and the FASB

frameworks as they relate to accurate financial reporting. Mankin et al. stated that

financial reporting must be additional business-related information to produce reliable,

concise data.

Ying et al. (2018) discussed the reliability of accurate financial reporting when the

credibility of the manager is unknown. Ying et al. used the equilibrium model to test the

data of their study. The sample for the study came from the U.S. earning announcement

data during the 2002-2012 period. Ying et al. used equilibrium equation to examine the

U.S. announcement data. Ying et al. studied the stock risk data to determine whether a

manager’s credibility affected the overall data reporting in a company’s financial

reporting. Donahue-Piro (2017) discussed the importance of having an accurate reporting

system in an organization. Donahue-Piro explained the need to stay current with financial

reporting technology. Technology changes on a day-to-day basis. Companies’ leaders

regularly purchase software to streamline financial reporting and it is imperative for

businesses to stay up to date with technology. Often, leaders of corporations buy software

but do not keep up with the system updates. Donahue-Piro explained how companies

missed ways to streamline processes by not staying current with the most up-to-date

software that they previously purchased. Stunda (2017) examined the difference between

IFRS versus GAAP reporting of cash flows, as it relates to security prices. Managers have

more flexibility when following the IFRS reporting standard as opposed to GAAPs. In

addition, GAAPs require firms to classify interest paid, interest received, and dividends

as operating flows on the balance sheet whereas IFRS allows businesses to report these

items within the operating cash flow (Stunda,

2017). The GAAP reporting standard contains more transparent information than the

IFRS. A firm will be able to hide more of their financials using the IFRS reporting

standards.

Ying et al. (2018) hypothetically split the manager’s selections into two

categories, which are the honest and dishonest managers, because credibility was an

unknown variable. While the honest managers reported information truthfully, the

dishonest managers manipulated the data. Ying et al. concluded that if investors feel that

the balance sheet contains manipulated data, it will ultimately influence their decision to

invest in a company financially. Dishonest managers tend to have higher balance sheet

accruals because they report on forecast numbers instead of actual data. The equilibrium

models show that dishonest managers have aggressive manipulations in their data to

cover up the absence of real-time data. Donahue-Piro (2017) researched an insurance

company. One of the essential parts of the insurance world is to build a clean, precise, and

reliable database (Donahue-Piro, 2017). Marketing inaccurate information to future

customers can make the insurance company look unprofessional. In a competitive

market, such as the insurance company, it is imperative that individuals using the

reporting system produce accurate and current information. This data can ultimately

determine whether the company gain new customers or lose existing customers. Stunda

(2017) used 2006-2016 data from the European securities markets and from the U.S. as

the sample size in this research study (Stunda, 2017). While leaders of the European

securities markets utilized the IFRS accounting standard, U.S. firms used the GAAP

accounting standard. The forecast accuracy was higher in the European securities market

than in U.S. firms. However, U.S. firms had a higher degree of accounting correlation

between accounting earnings and stock prices than the European securities market. To

conclude, while the IFRS-based businesses are more cash-flow sensitive, GAAP-based

firms are more accounting-earnings sensitive (Stunda, 2017).

Debt Control

Buthelezi & Nyatanga (2018) researched the debt crisis in 15 Southern African

Development Community as well as 15 Economic Community of West African States

countries from 1970 to 2017 to determine if there is a correlation between government

debt and economic growth. The goal of the study was to determine what percentage of

debt the government had to fall under to minimize the burden on economic debt. Jagger

(2017) took an interest in the Latin American chemical industry market and studied the

financial debt of the Latin American chemical industry market and ways for the

companies’ leaders to eliminate or decrease their outstanding debt. The primary company

that Jagger focused on was Petrobras. Petrobras is a Brazilian state-energy company that

incurred a deficit of $123 billion (Jagger, 2017). Petrobras was a parent company that had

many subsidiaries. The action plan was to sell several of the subsidiaries that were not

making a profit to reduce the overall debt (Jagger, 2017). To regain the investors’

confidence, Petrobras proposed the sale of their PTA and PET assets to Mexican producer

Alpek for $385 million (Jagger, 2017). Garg (2017) discussed the way healthy

securitization might help financial institutions in lowering funding cost and capital

utilization. Business leaders used securitization as a tool to increase credit flow to worthy

borrowers, which ultimately allows investors to make sound financial decisions.

Buthelezi & Nyatanga (2018) explained that the overall aim was to reduce cost

without affecting economic growth. Buthelezi & Nyatanga revealed through their study

that there was a correlation between government debt and economic growth. The more

money and incentives the government put into the economy to create job opportunities,

the more the debt amount increased. Buthelezi & Nyatanaga concluded that as the higher

the debt ratio, the more it reduces the percentage of economic growth. The percentage of

economic growth and debt volatility had to be under 60% to promote economic growth.

Companies must focus more on the loan approval process in the financial institution

market (Jagger, 2017). The asset shedding was the primary focus of Petrobras debtcontrol

plan to create a more stable and sustainable business position for the company

(Jagger, 2017). After reviewing Petrobras debt elimination plan, Jagger discovered that

Petrobras should have monopolized on one area of the chemical industry to create a

stable profit margin, instead of selling various petrochemicals and fertilizers and

incurring more debt (Jagger, 2017). The investors also suggested that Petrobras relinquish

some of its subsidiaries and focus only the few companies that created a substantial profit

margin. Garg (2017) explained the way loan officers pull the credit risk analysis on future

customers before deciding whether to give the potential customer a new line of credit.

The software used for this analysis was not always 100% accurate. Not every company

submits its payment history to the credit risk companies (Garg, 2017). The credit risk

report can be misleading. Companies need to create their checks and balances when

establishing credit lines for future customers. A wrong decision can lead to outstanding

receivables, which leads to increase in debt (Garg, 2017). Any company can benefit from

this check and balance, not just financial institutions. Companies as a whole should focus

on their accounts receivable departments because credit managers decide whether a future

customer will generate a profit or liability to the company (Garg, 2017).

Heike (2019) researched the bad debt utility crisis for UK utilities. There was a

$2.2 billion debt due to customers not paying their utilities bills (Heike, 2019). Heike felt

that the government should get a hold on the utility debt crisis before it becomes

unmanageable. Marinescu and Albu (2018) researched the public debt statistics in EU

countries. Public debt is an issue that affects all countries in the world. The critical

increase in the EU countries public debt is utterly changing the economic growth process

(Marinescu & Albu, 2018). Marinescu and Albu analyzed the EU debt sustainability

process and built a model to show the long-term debt effect as a function of variables,

such as interest rates. Ofori et al. (2014) researched the views and motives related to

corporate social responsibility and financial performance in the Ghanaian banking sector.

Due to lack of studies about Ghana’s banking sector corporate social responsibility, Ofori

et al. took on the challenge to tackle this debt topic in Ghana. Van Bekkum (2016)

researched debt and bank risk. Executive managers contributed to the deficit in the bank

sector. The decisions they made regarding risk and risk-taking was one of the most

critical factors that contributed to the debt issue. Compensation practices also contributed

to the debt issue (Van Bekkum, 2016).

Marinescu and Albu (2018) utilized data from Eurostat, IMF, and World Bank to

test their debt model. Marinescu and Albu concluded that different variables affect the

public debt issue in EU countries. Economy and interest rate variations both contribute to

excess debt issue in the world. Ofori et al. (2014) chose 22 banks as a sample size for

their Ghanaian bank study. Ofori et al. created a questionnaire for the 22 chosen banks to

obtain the data for the study. The secondary data came from archival records about

financial performance in the Ghana banking sector. Ofori et al. also discussed the

importance of debt control and of scrutinizing the loan process when lending money. Van

Bekkum (2016) analyzed compensation data from several banks and discovered that

salaries, as well as executive management bonuses, were excessive. The bonus

compensation amounts exceeded several of the manager’s yearly salaries. As a result,

legislation has granted shareholders the right to determine compensation requirements for

the executive managers. Setting strict limitations to the manager’s compensation frees up

finances to offset the debt incurred by the monthly bank operations expenses (Van

Bekkum, 2016).

Transition

Section 1 of this qualitative case study included the (a) background of the

problem; (b) problem statement; (c) purpose statement; (d) nature of the study; (e)

research and interview questions; (f) conceptual framework; (g) operational definitions;

(h) assumptions, limitations, and delimitations; (i) significance of study; and (j) literature

review.

In Section 2, I provide an in-depth description of the research project. Section 2

includes the purpose statement, role of the researcher, participants, research method and

design, population and sampling, ethical research, data collection instruments, data

collection techniques, data organization technique, data analysis, reliability and validity,

and transition and summary. In Section 3, I presented the research findings, application to

professional practice, implications for social change, recommendations for action and for

future research, reflections, conclusions, and summary.

Section 2: The Project

Financial managers argue that accurate financial reporting promotes a successful

and profitable business (Lee et al., 2020), whereas inaccurate financial reporting is one of

the causes of business failure (Stanek, 2014). The purpose of this study was to explore the

strategies financial managers use to effectively conduct corporate-responsible financial

reporting to achieve financial stability. This section contains the purpose statement, role

of the researcher, participants, research method and design, population and sampling,

ethical research, data collection instruments, data collection techniques, data organization

technique, data analysis, reliability and validity, and transition and summary.