PROPOSED MEANS TO ACHIEVE STATED RESEARCH OBJECTIVES
Based on the researcher’s philosophy, methods and approach highlighted above, the following are means to achieve stated research objectives.
OBJECTIVE 1:
To examine the extent to which oil and gas companies engage in foreign currency transactions and translations and the impact of such on profitability.
Proposed Means to Achieve this Objective
The research will involve an investigation into aspects of the oil and gas industry value chain affected by foreign exchange exposure using extant literature and peer reviewed journal articles. As part of analysis, the researcher will engage in an examination of form 20-F comments by selected companies relating to the extent of foreign currency transactions and the impact of foreign currency exposure on profitability. Further, ratio analysis is used to express one variable in terms of another. Ratios are applied in calculating stated profitability determinants. They include the return on total assets (ROTAt), The Profit margin (PMt) and the Equity multiplier (EMt). This is the aid the investigation into the impact of foreign exchange transactions on the major determinants of profitability of oil and gas companies. A regression Analysis of foreign exchange gains and losses and profitability is also conducted to achieve this objective. OBJECTIVE 2 To identify differences in IFRS and U.S GAAPs reporting requirements for foreign currency translation, conversion and exchange rate gains and losses. Proposed Means to achieve this objective An extensive review of IFRS and US GAAP to assess areas of similarities and departure in recognition, measurement and disclosure of foreign exchange gains and losses. This will include an analysis of both standards’ provision for recognition and management of foreign exchange exposure activities. The review involves use of officially published standards together with IFRS/US GAAP similarity and differences publications by the ‘’Big four’’ accounting firms. These include Ernst and Young, KPMG, Delloite and PWC. OBJECTIVE 3 To assess US standards against IFRS in order to determine which set of standards produces financial statements with higher quality foreign exchange gains or losses reported when fluctuations in historical currency values in selected countries are put into perspective. Proposed Means to achieve this objective The researcher examines comments relating …show more content…
First, the researcher tests the comparability of foreign exchange gains and losses figures produced under both IFRS and US GAAP standards using the Gray’s comparability index. This index was originally used by Gray (1980) but later used by Street et al. (2000) to test the comparability of accounting numbers produced for a single entity using different standards. This is given as: 1- (FOREX G&LUSA- FOREX G&LIFRS)/ FOREX G&LUSA
Where FOREX G&LUSA = Foreign exchange gains and losses reported under US GAAP and FOREX G&LIFRS = Foreign exchange gains and losses reported under IFRS.
The value of this index becomes 1.0. If FOREX G&LUSA = FOREX G&LIFRS for any given year. The researcher further applies both SPSS statistical package and excel application software to conduct ratio analysis and correlation checks (Such checks are designed to reveal the relationship between currency exchange rates fluctuations and foreign exchange gains and losses reported under separate standards). The use of software (Such as SPSS statistical software) may aid in the accuracy and speed of results. Also, Computation of the major determinants of profitability (DuPont ROE) are made using Microsoft excel.
LIMITATIONS OF THE
Based on the researcher’s philosophy, methods and approach highlighted above, the following are means to achieve stated research objectives.
OBJECTIVE 1:
To examine the extent to which oil and gas companies engage in foreign currency transactions and translations and the impact of such on profitability.
Proposed Means to Achieve this Objective
The research will involve an investigation into aspects of the oil and gas industry value chain affected by foreign exchange exposure using extant literature and peer reviewed journal articles. As part of analysis, the researcher will engage in an examination of form 20-F comments by selected companies relating to the extent of foreign currency transactions and the impact of foreign currency exposure on profitability. Further, ratio analysis is used to express one variable in terms of another. Ratios are applied in calculating stated profitability determinants. They include the return on total assets (ROTAt), The Profit margin (PMt) and the Equity multiplier (EMt). This is the aid the investigation into the impact of foreign exchange transactions on the major determinants of profitability of oil and gas companies. A regression Analysis of foreign exchange gains and losses and profitability is also conducted to achieve this objective. OBJECTIVE 2 To identify differences in IFRS and U.S GAAPs reporting requirements for foreign currency translation, conversion and exchange rate gains and losses. Proposed Means to achieve this objective An extensive review of IFRS and US GAAP to assess areas of similarities and departure in recognition, measurement and disclosure of foreign exchange gains and losses. This will include an analysis of both standards’ provision for recognition and management of foreign exchange exposure activities. The review involves use of officially published standards together with IFRS/US GAAP similarity and differences publications by the ‘’Big four’’ accounting firms. These include Ernst and Young, KPMG, Delloite and PWC. OBJECTIVE 3 To assess US standards against IFRS in order to determine which set of standards produces financial statements with higher quality foreign exchange gains or losses reported when fluctuations in historical currency values in selected countries are put into perspective. Proposed Means to achieve this objective The researcher examines comments relating …show more content…
First, the researcher tests the comparability of foreign exchange gains and losses figures produced under both IFRS and US GAAP standards using the Gray’s comparability index. This index was originally used by Gray (1980) but later used by Street et al. (2000) to test the comparability of accounting numbers produced for a single entity using different standards. This is given as: 1- (FOREX G&LUSA- FOREX G&LIFRS)/ FOREX G&LUSA
Where FOREX G&LUSA = Foreign exchange gains and losses reported under US GAAP and FOREX G&LIFRS = Foreign exchange gains and losses reported under IFRS.
The value of this index becomes 1.0. If FOREX G&LUSA = FOREX G&LIFRS for any given year. The researcher further applies both SPSS statistical package and excel application software to conduct ratio analysis and correlation checks (Such checks are designed to reveal the relationship between currency exchange rates fluctuations and foreign exchange gains and losses reported under separate standards). The use of software (Such as SPSS statistical software) may aid in the accuracy and speed of results. Also, Computation of the major determinants of profitability (DuPont ROE) are made using Microsoft excel.
LIMITATIONS OF THE