Tanta University
Faculty of
Commerce
Accounting
Department
A Comparative Study of Global
Financial Crises’ impacts on
Developing International and Egyptian Financial Accounting Standards
Thesis Submitted to Fulfill the Requirements for
The Master Degree in Accounting
Submitted by
Hamada El-Said El-masserowy
Demonstrator – Accounting Department
Supervised by
|
Dr.
|
Prof. Dr.
|
|
Alaa-Eldin Tawfik Ibrahim
Lecturer of Accounting
|
Mohammad Ahmad El-Essely
Professor of Financial
Accounting.
|
2014
1. Introduction
In latest decades, the world had faced a
lot of financial crises in that led to collapse of many great institutions
around the world. For example, the financial crisis of Asian Tigers that began
in Thailand in 1997 and had been transferred to other countries such as
Indonesia, Malaysia, Philippine, and Hong-Kong. The impacts had been
transferred the whole world, as the financial collapse of many global
institutions, such as Enron in which losses of investors totaled 70 billion
dollars and Arab losses totaled one billion dollar, and the consequent collapse
of Arthur Anderson auditing firm. Misappropriation and manipulation also
occurred in other companies such as WorldCom, America Online, and Paramalate.
In addition, another financial crisis occurred in 2008 due to mortgages.
Accounting is
usually criticized in most financial and economic crises, due to the inability
of financial reports to provide the relevant information that helps forecast
these crises or handle their resulting impacts. In other words, the accounting
system has been criticized because its failure in confrontation of
environmental variables represented by global financial crises.
As accounting is a
social science that reacts with changes and developments that take place in the
society, accounting should develop with these changes. As the Accounting theory
contributes in rationalizing the accounting practice through laying scientific
principles related to determining measurement bases and presentation of
financial transactions. The following step of translating these principles into
practice is done through issuing accounting standards.
2. Research Problem
Accounting standards provide rules for
daily accounting work that are similar to the rules included in the accounting
procedures guide. Thus, developing standards will result in developing
financial reports through providing users with more holistic and consistent
information. In other words, developing standards leads to increasing relevance and
reliability of accounting information provided. Since accounting standards are
the most important tool for accounting practice, accounting standards should be
characterized by some characteristics, including:
-
Economical, political, legal, and
environmental characteristics should be considered when accounting standards
are prepared.
-
Accounting standards should be realistic
and change with environmental conditions.
The following
question can be asked:
What is the role
that accounting standards had played in facing the environmental variables
represented by the severe financial crises? In other words, did the standards'
issuing bodies succeed in facing these variables? And what are the mechanisms
they used?
In order to answer this question, the
researcher founded that, for the mortgage crisis, that the response of IASB has
three main stages:
-
Executing the proposals and recommendations of the Financial
Stability Forum, in cooperation with FASB
-
Adding modifications to current standards as well as specialized
guidance
-
Making long-run developments and improvements to the standards
Concerning Egypt, the response of the
issuing body was limited to a decree of Minister of Investment of modifying
Egyptian accounting standards 25 and 26 related to financial instruments to be
consistent with the international accounting standards.
The research questions are:
1. What
are the impacts of global financial crises on development of international
accounting standards?
2. What
are the impacts of global financial crises on development of Egyptian
accounting standards?
3. Do
the speed and degree of response to environmental factors represented by
financial crises differ between international and Egyptian issuing bodies
3. Research Objective
This research aims
at achieving the following:
1. Demonstrating
how global financial crises contributed in remedying weaknesses in
international accounting standards. In other words, demonstrating how these
crises contributed in developing international accounting standards.
2. Demonstrating
how global financial crises contributed in remedying weaknesses in Egyptian
accounting standards. In other words, demonstrating how these crises
contributed in developing Egyptian accounting standards.
3. Formulating,
for the Egyptian standards' issuing body, the relevant strategy to deal with
crises and challenges, through comparison of degree and speed of response of
the international and Egyptian issuing bodies.
4. Research Importance
This research is important as it handles
the impacts of global financial crisis on international and Egyptian financial
standards, and how the issuing bodies respond to the different financial
crisis. This helps derive integrated strategy that can be adopted by the
issuing bodies in Egypt to face crisis and challenges, so that the standards
achieve best possible performance.
5. Research Methodology
The researcher uses the descriptive
analytical method, through examining and analyzing different aspects of the
relationship between global financial crises and developing international and
Egyptian accounting standards. In addition, the researcher depends on the
comparative approach to compare responses of international and Egyptian
standards' issuing bodies to formulating national strategy that helps the
issuing body in Egypt in dealing with different crises and challenges.
6. Research Hypotheses
The main hypothesis of this study is:
"The global financial crises have positive impacts on developing
international and Egyptian financial accounting standards".
The main hypothesis is divided into four sub
hypotheses:
First: The global financial crises have
positive impacts on developing performance of elements of perspective of
performance success.
Second: The global financial crises have
positive impacts on developing performance of elements of perspective of users
of international and Egyptian accounting standards.
Third: The global financial crises have
positive impacts on developing performance of elements of perspective of
internal processes.
Fourth: The global financial crises have
positive impacts on developing performance of elements of perspective of
learning and growth.
7. Research Organization
Chapter One: General Overview
Chapter Two: Literature Review
Chapter Three: Impact of Global Financial
Crises on Developing
International
and Egyptian Accounting Standards
Chapter Four: Field Study
Chapter Five: Proposed Strategy for the
Egyptian Issuing Body
Chapter Six: Conclusion, Results, and
Recommendations
