Finance Proposal Sample - An analysis of the impact of financial derivative instruments in international finance

Topic: An analysis of the impact of financial derivative instruments in international finance

Methods and Ethical Issues

This section of the proposal outlines the methods which will be implemented in the proposed research. Any ethical issues relevant to the proposed research along with the primary objective of the proposed research are also explained in this section.

Object of Study

The primary aim of the proposed research is to identify and analyse the impact of financial derivative instruments in international finance and this research aim will be accomplished by achieving several research objectives which have been highlighted in the introduction section of this proposal.

Research Approach

A research approach plays an integral role in a research as an effective research cannot be conducted by ignoring the research approach. The research approach provides a means for analysing and evaluating an element, hypothesis or phenomenon efficiently and effectively. Valid and logical conclusions in a research can only be derived when a researcher realises the significance of an appropriate research approach and methodology and the role it plays during a research. A researcher must analyse various types and forms of research approaches and methodologies before actual implementation to ensure that the most relevant, appropriate and effective research approach is selected. This will not only lead to effective collection and analysis of data but the research outcomes can also be achieved more easily and effectively (Bergh & Ketchen, 2009).

The researcher has to analyse various research methods and approaches in the planning and design phases of the research as a specific research approach needs to be identified before the actual research process starts. A researchers needs to be extremely cautious in selecting or choosing the research approach or methodology and ensure that only the most appropriate research approach is selected and implemented. There is an array of various paradigms, methods, approaches, techniques and tools for the researcher to select from. The researcher needs to analyse and evaluate these elements before designing the specific approach for a particular research (Raulin & Graziano, 2006).

The primary aim of all researchers is the effective accomplishment of research outcomes whether these researches are carried out in the academic context or business context. The research outcomes can only be achieved in an effective manner if the researchers realise the importance of an appropriate research approach and implement that approach during the actual research process (Blessing & Chakrabarti, 2009).

The research approach implemented in the proposed research will be based on the positivist research paradigm due to the objectivity of the research. This paradigm will be implemented to identify and analyse the impact of financial instrument derivates in international finance through a combination of qualitative and quantitative techniques. The data for the proposed research will be acquired from both primary and secondary sources. Survey questionnaires will be utilised for gathering data from primary sources. These survey questionnaires will be sent to executives of various multinational organisations in order to acquire their perspective on the impact of financial instrument derivatives in international finance. The secondary data on the other hand will be acquired from various sources including articles from journals, books, company records, websites and reports. The findings and results of the proposed research will be mainly based on data collected from primary sources while data gathered from secondary sources will be utilised to support the findings and observations of primary research.

The methodology of the proposed research will be structured as a combination of qualitative and quantitative research techniques. The data acquired from secondary sources will be analysed by implementing qualitative research methods while the data acquired from primary sources will be analysed using quantitative research methods. Both the qualitative and quantitative research methods carry benefits and limitations and this is the primary reason why a combination of these methods will be implemented where the proposed research can benefit from the advantages of both and alleviate any limitations found in these methods if they are implemented individually. The qualitative and quantitative research methods are explained in the following section with their respective advantages and limitations. The evaluation of the benefits and limitations of these methods will enable the researcher to apply these methods more accurately and effectively.

Evaluation of Data Analysis Methods

Quantitative Research Methods

The quantitative techniques of research are usually implemented in researches carried out in areas of medicine, finance, psychology, economics and other researches based on science. The quantitative methodology entails the use of quantitative data such as measurements, averages and ratios. Statistical and mathematical tools and techniques are commonly implemented in quantitative researches to analyse, interpret and evaluate data. The statistical or mathematical data acquired from research participants or relevant research areas is evaluated and analysed to arrive at conclusions through statistical results. Quantitative researches are usually conducted to investigate the interdependencies and interrelationships of specific variables related to a phenomenon (Ulin, Robinson, & Tolley, 2004). This is one of the primary reasons for implementing quantitative methods in the proposed research as the aim of the proposed research is to analyse the impact of financial derivative instruments in international finance. Statistical and mathematical analysis is usually applied in quantitative research techniques and may include mathematical and statistical tools such as measures of central tendency, averages, ratios, correlation and regression to analyse a sample population and variables acquired from the population (McNabb, 2002).

Benefits and limitations

The quantitative research methodology carries several benefits and limitations in a research. One of the primary advantages of using quantitative methods is that lesser amount of time required to gather, analyse and interpret quantitative data. Any changes in variables are easily identified and an objective explanation can be presented with respect to the data which will not only benefit the researcher but other users of the research as well. The easy comparability of quantitative data with historical data and other relevant researches is another advantage of the quantitative approach to research. In addition to the benefits, there are several limitations of the quantitative research approach as well. One limitation of this approach is the over simplified format of presentation where a significant amount of subjective and qualitative data may be ignored. Results of quantitative researches may not be practically applicable in real world scenarios of generalised nature. The data acquired in this approach should be quantitative and measurable otherwise it would be irrelevant and will not yield useful results (French, Reynolds, & Swain, 2001).

Qualitative Research Methods

The qualitative techniques of research unlike the quantitative techniques are usually implemented in researchers which are more subjective in nature such as literature, humanities and sciences but these techniques are also implemented in combination of the quantitative techniques where an analysis of both qualitative and quantitative data is required. The qualitative research approach is more descriptive and explanatory in nature and is applied to analyse, interpret and present data which is subjective in nature. The qualitative research approach enables a researcher to analyse the strength and richness of a specific phenomenon, situation or problem. The qualitative research approach requires a heavy involvement of the researcher and the abilities, expertise, knowledge and experience of the researcher are quite important in carrying out a qualitative research effectively (Burns & Grove, 2004).

Benefits and Limitations

There are several limitations and benefits of the qualitative approach to research as well and one of the most significant advantages of this approach is the flexibility in analysis and interpretation as the research can be adapted to changing situations and conditions. The involvement of the researcher is much higher in the research process as compared to other research approaches. A qualitative research provides a more descriptive, in-depth and explanatory presentation of the analysis and results as compared to other approaches. There are several disadvantages of this research approach as well such as the biasness of the research participants of researcher with respect to the whole research or any particular part of a research. As this approach is subjective in nature the scope of researches conducted under this approach is quite limited which implies that the same data and analysis techniques may yield different results in different situations. A higher amount of time is required to conduct a qualitative research as compared to other researches (Harrison, 2001).

Ethical Issues

There are various issues and risks which may be present in the proposed research as the researcher will collect data from both secondary and primary sources. The probable risks and issues relevant to the proposed research are outlined below.

Probable Risks of the Proposed Research

· There are several probable risks in the proposed research and some of these are outlined below.

· The risk of respondent identities being revealed

· The probable risk of breach of privacy and confidentiality of research participants and their relevant organisations

· Danger of using data from secondary sources without appropriate acknowledgement and referencing

· A risk of research participants feeling marked or targeted due to extensive use of data collection techniques.

Probable Solutions for Ethical Issues

The researcher will take appropriate prior approval before contacting any research participants and will ensure that the data and identities relevant to research participants are kept highly confidential and are only used for research purposes. Anonymous names will be replaced with actual names of companies and research participants to ensure security and privacy. A proper acknowledgement and referencing system will be used to avoid any instances of plagiarism and ensure that all data acquired from other sources is properly referenced and acknowledged. The survey questionnaires will be structured in such a manner that the research participants feel quite comfortable while answering and do not have a feeling of being targeted.

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Accounting & Auditing Sample for Master's Level

Title: The Directors of Fast Track PLC are anxious to maintain their share price, as a large US corporation is about to attempt a hostile takeover. As the company has no reserves, it will be unable to pay a dividend this year if it does not make a significant profit. Since it has already failed to pay an interim dividend, the share price has already fallen significantly and may plummet if there is no final dividend either.

Companies Act 1985 and IAS

[Student Name]

[Course Title]

[Instructor]

[Date

Companies Act 1985 and IAS

An audit of the financial statements and records of Fast Track PLC reveal that the directors have made adjustments in the accounting records of the company which are not permissible or are in conflict with the accounting standards and company law. These adjustments have been made in the accounting records to present a handsome profit in the financial statements which translates into healthy dividends to avoid any hostile takeover in the future. The irregularities found in the adjustments made by the directors in the financial statements are presented in the following sections with reference to Companies Act 1985 and International Accounting Standards.

1. Revaluation of Assets

The land sold by the company for £20 million was initially recorded at a historical cost of £5 million but the land was revaluated to £10 million before sale. According to Companies Act (1985), all profit or loss arising from the revaluation of an asset has to be credited or debited to a separate revaluation reserve account but the company failed to transfer this gain on revaluation of £5 million to the revaluation reserve account. The appropriate method at the time of revaluation would have been to transfer the gain resulting from revaluation to the revaluation reserve account and presented separately on the balance sheet. The amount may be transferred from the revaluation reserve to the profit and loss account on sale of land and not before it. The company had an option of reverting back to the historical cost system but that should have been implemented before the sale of land and not after it. On the other hand IAS 16 (2008) requires that when a revaluated asset is disposed off the amount in the revaluation surplus may be left as it is or it may be directly transferred to the retained earnings section. The recording of £20 million revenue and a cost of £5 million, resulting in a £15 million profit is an inappropriate presentation. The Companies Act 1985 supersedes the international accounting standards in this case and the directors may transfer the realised amount of 5 million from the revaluation reserve account to the profit and loss account and present the remaining £10 million profit separately on the profit and loss statement. The directors have to ensure that appropriate disclosures are made with respect to this transaction in the notes accompanying the financial statements. The presentation of this transaction on company accounting records should be as follows

£ Million

Income from sale of Land 20

Fair Value of Land (10)

Profit from sale of land 10

Other Comprehensive income 5^*

Total income generated through sale 15

* 5 million transferred from revaluation reserve on realisation of profit

2. Revenue Recognition

The company acquired a contract of supplying portable toilets to Worldwide Festivals PLC in 2009 where a total income of £12 million will be generated over a period of three years. The company supplied half of the toilets by the end of January 2010 while the remaining will be supplied by 31^st March 2010. The directors have proposed to include all revenues related to the delivered toilers in the income of 2009. The primary problem in this transaction is related to revenue recognition. IAS 18 stipulates that revenue can be recognised when all of the following conditions are met (IAS 2009):

(1) The risks and rewards of ownership have transferred from the seller to the buyer

(2) The seller does not retain any managerial involvement or power over the sold items

(3) There is a probability that the future benefit associated with the sold item will flow to the company

(4) The revenue amount can be reliably measured

(5) The cost incurred during the transaction can be reliable measured.

In the case of Fast track PLC it is probable that the future benefit of the toilets delivered till January 31^st will flow to the company and the amount of revenue can be measured reliably. Furthermore, the risks and rewards, managerial involvement and control of half of the toilets delivered till January 31^st, 2010 have also been transferred to Worldwide Festivals PLC. On the other hand all of the revenue recognition requirements under IAS 18 have not been satisfied for the remaining toilets which will be delivered by 31^st March 2010. Therefore, the revenue arising from the first half of toilets worth £6 million can be recognised and included in the profit and loss account and the remaining revenue of £6 million cannot be recognised in the financial statements of 2009.

3. Recording revenues and provisions

Fast Track sold portable offices to Bloggs Builders PLC and entered into a contract where Bloggs could return the offices in the first nine months or Fast Track could seek the return of these offices in the same period. The company accountants should have made a provision of contingency for this transaction due to possible obligation to Bloggs if they returned the portable offices. IAS 37 stipulates that an entity must recognise a provision for contingency when there is an obligation, payment is more likely and the amount can be reliably estimated (IAS 1999).

The total revenue recognised from the sale of portable offices was £1.5 million while Bloggs returned £0.5 million worth of offices by the end of the year which means the actual revenue generated from the sale was 1 million. The company accounted for this revenue of £1 million but failed to recognise the saving on returned offices. The original sales value of the returned offices was £0.5 million whereas they were depreciated on a straight line basis at a rate of 25% for nine months which was 93,750. This means that the actual value of the returned offices which were sold for £0.5 million was 406,250 at the time of return which signifies a saving of 93,750 and total revenue of 1,093,750.

The company recorded servicing income of 150,000 while it completely ignored the cost associated with this income. According to IAS 18, the cost associated with services provided should also be recognised in the profit and loss along with the sales revenue (IAS 2009). Therefore Fast Track also needs to recognise and record the cost of 60,000 associated with servicing of offices. This implies that the company not only has to record a service income of 150,000 but it also has to record the associated cost of 60,000 in the profit and loss. The income structure for Fast Track PLC in this respect is presented below.

£

Revenue from Sale of offices 1,093,750^*

Other Income:

Servicing income 150,000

Cost of servicing (60,000)

Total Servicing income 90,000

Total Income generated 1,183,750

* Revenue from offices sold = £1 million

Savings from returned offices = 500,000 X 0.25 X 9/12

List of References

IAS. (2008). IAS 16 Property, Plant and Equipment. London: International Accounting Standards Board.

IAS. (2009). IAS 18 Revenue. London: International Accounting Standards Board.

IAS. (1999). IAS 37 Provisions, Contingent Liabilities and Contingent Assets. London: International Accounting Standards Board.

Office of Public Sector Information. (2010, November 7). Companies Act 1985 (c. 6). [Online] Available from: Statutelaw.gov.uk: [Accessed on November 7, 2010]

Author: Masters Dissertation