DECLARATION

I, MASIKA BRIDGET, hereby declare that the information presented in this research dissertation
is authentic and not a reproduced instance of any other research proposal submitted to any other
university/institution of higher learning by any graduate.

Signed: ……………………….

MASIKA BRIDGET

16/KUS/BBC/165U

Date: ………………………….

i
 APPROVAL

This research report is submitted for examination with my approval as a supervisor and is worth
for the award of degree in Bachelor of Business Computing of Kampala University

Signature: ………………...............

Supervisor: MR WALAKIRA HUSSEIN

Date: ………………………………

ii
 DEDICATION

This Research Report is dedicated to Mr. Baluku Eryeza and Mrs. Baluku Perezi who knew the
importance of education and supported me all through my studies. May the Almighty God listen
to your prayers always as I dedicate both of you to Him.

i
 ACKNOWLEDGEMENT

Sincerely, I extend my gratitude to the following for their comprehensive role towards the
accomplishment of this dissertation for without whom it would have otherwise ended in vein.

My late mother Masika Yolesi and my father Mr. Tibamanya Henry for they are the reason I exist.
My grandparents Mr. Baluku Eryeza and Perezi Baluku who have exhibited great care, support
and encouragement for me from childhood alongside my brother Kaleba John Patrick.
My uncles Masereka Adidas, Bwambale Moses, and my aunts Biira Feresi and Biira Loice and all
my friends who rendered great cooperation and inspiration in the whole process and in my life.
You will always be at heart.

I salute my lecturers at Kampala University for their fruitful effort towards me and fellow students
especially when they taught us complete and concrete content. You have made me a resourceful
person.
Special thanks go to my supervisor Mr. Walakira Hussein for his technical guidance in this
dissertation.

Finally I thank the almighty God for by his grace I have been able to complete this research
dissertation.

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LIST OF ACRONYMS

IASC………………...International Accounting Standards Committee

IFRIC………………..International Financial Reporting Interpretation Committee

ICPAU…………. …..International Certified Accountants of Uganda

FIFO……………. …..First In First Out

LIFO…………………Last in Last Out

IAS……………… ….International Accounting Standards

CIMA…………...........Certified International Management Accountants

UBOS………………..Uganda Bureau of Statistics
ACCA………………..Association of Chartered Certified Accountants

FRSSE……………….Financial Reporting Standards for smaller Entities

IASB…………….........International accounting Standards Board

P&L………………..…Profit and Loss

IFRS ………………….International Financial Reporting Standards

GAAP………………...General Accepted Accounting Principles

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LIST OF TABLES

Table 1: composition of the sample size .................................................................................................. 21

Table 2: Gender of respondents............................................................................................................... 24
Table 3: Age of respondents ..................................................................................................................... 25
Table 4: Length of employees stay in the organization ......................................................................... 25
Table 5: Education category of respondents .......................................................................................... 26
Table 6: Responses as to whether the company applied IFRS.............................................................. 26
Table 7: Responses on whether all relevant IFRS were applied in Hima cement limited .................. 27
Table 8: Responses on the application and use of IFRS 1 ..................................................................... 28
Table 9: Responses about the adoption and use of IFRS 3 in the company ........................................ 29
Table 10: Responses on the adoption and use of IFRS 10 in Hima cement limited. ........................... 29
Table 11: Responses on the qualitative characteristics of the financial statements in Hima cement
limited. ....................................................................................................................................................... 30
Table 12: Responses on the extent of the relationship between IAS/IFRS and financial statements.
.................................................................................................................................................................... 32
Table 13: Responses on the comments about the relationship between IFRS and quality of financial
statements. ................................................................................................................................................. 32

iv
Table of Contents
DECLARATION ............................................................................................................................................................i
APPROVAL ................................................................................................................................................................. ii
DEDICATION ...............................................................................................................................................................i
ACKNOWLEDGEMENT ............................................................................................................................................ ii
LIST OF ACRONYMS ............................................................................................................................................... iii
LIST OF TABLES........................................................................................................................................................iv
ABSTRACT ............................................................................................................................................................... vii
CHAPTER ONE ............................................................................................................................................................2
INTRODUCTION .........................................................................................................................................................2
1.0. Introduction ..................................................................................................................................................2
1.1. Back ground of the study .............................................................................................................................2
1.2. Problem statement ..............................................................................................................................................4
1.3. Purpose of the study............................................................................................................................................4
1.4. Specific Objectives of the study .........................................................................................................................4
1.5. Research questions..............................................................................................................................................4
1.6. Scope of the study ...............................................................................................................................................4
1.6.1. Content scope ..............................................................................................................................................4
1.6.2. Geographical Scope .....................................................................................................................................5
1.6.3. Time Scope ..................................................................................................................................................5
1.7. Significance of the study ................................................................................................................................ 5
CHAPTER TWO ...........................................................................................................................................................6
LITERATURE REVIEW ..............................................................................................................................................6
2.0. Introduction ..................................................................................................................................................6
2.1. IFRSs currently used and adopted by Hima cement limited. .......................................................................6
2.1.1. International Financial Reporting Standard/ international Accounting Standard (IAS) 1 and
presentation of financial statements. ......................................................................................................................6
2.1.2. International Financial Reporting standard 3 and presentation of financial statements. ..........................8
2.1.3. International Financial Reporting Standard 4 and financial reporting. ....................................................9
2.1.4. International Financial Reporting Standard 10 and financial reporting. ................................................ 10
2.2. Factors affecting the quality of financial statements. ................................................................................. 12
2.2.1. Quality and financial reporting. ............................................................................................................. 12
2.2.2. Factors affecting the quality of financial reports. .................................................................................. 13
2.3. Relationship between IFRSs and the quality of financial statements. ........................................................ 18
CHAPTER THREE ..................................................................................................................................................... 20
METHODOLOGY ...................................................................................................................................................... 20
3.0. Introduction ................................................................................................................................................ 20
3.1. Research design.......................................................................................................................................... 20
3.2. Sampling Design ........................................................................................................................................ 20
3.3. Study population ........................................................................................................................................ 20
3.4. Sample size ................................................................................................................................................ 21
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 3.5. Data collection methods and tools ............................................................................................................. 21
3.5.1. Questionnaires ....................................................................................................................................... 21
3.5.2. Interviews .............................................................................................................................................. 21
3.6. Data Quality Control .................................................................................................................................. 22
3.7. Procedure for data collection...................................................................................................................... 22
3.8. Data processing, presentation and analysis ................................................................................................ 22
3.9. Limitations to the study .............................................................................................................................. 22
CHAPTER FOUR ....................................................................................................................................................... 24
DATA PRESENTATION, ANALYSIS AND INTERPRETATION OF FINDINGS ................................................ 24
4.0. Introduction ................................................................................................................................................ 24
4.1. Demographic variables of respondents ...................................................................................................... 24
4.1.1. Findings on the gender of the respondents. ............................................................................................ 24
4.1.2. Findings on the age bracket of the respondents. .................................................................................... 25
4.1.3. Findings on the respondents stay in the organization ............................................................................ 25
4.1.4. Findings on the level of education attained by the respondents. ............................................................ 26
4.2. Findings on whether the company applied international financial standards to ensure quality of financial
reports. 26
4.2.1. Findings on whether the Company applied all relevant IFRS. .............................................................. 27
4.2.2. Findings on the application of International Financial Reporting Standard 1 in Hima cement limited. 28
4.2.3. Findings on the application of International Financial Reporting Standard 3 in Hima cement limited. 29
4.2.4. Findings on the application of International Financial Reporting Standard 10 ...................................... 29
4.3. Findings on the qualitative characteristics of financial statements. ........................................................... 30
4.4. Findings on the relationship between international financial reporting standards and the quality of
financial statements. ................................................................................................................................................ 32
CHAPTER FIVE ......................................................................................................................................................... 33
DISCUSSION, RECOMMENDATIONS AND CONCLUSIONS ............................................................................. 33
5.0. Introduction ................................................................................................................................................ 33
5.1. Summary of the findings ............................................................................................................................ 33
5.2. Demographic characteristics ...................................................................................................................... 33
5.3. IFRS’s adopted and applied by Hima Cement limited. .............................................................................. 33
5.4. Factors affecting the quality of financial statements .................................................................................. 34
5.5. Relationship between IFRS and the quality of financial statements. ......................................................... 34
5.6. Conclusions ................................................................................................................................................ 34
5.7. Recommendations. ..................................................................................................................................... 35
5.8. Suggested areas for further research. ......................................................................................................... 35
REFERENCES ............................................................................................................................................................ 36
APPENDICES ............................................................................................................................................................. 37
APPENDIX A: QUESTIONNAIRE ........................................................................................................................... 37
APPENDIX B: TIME FRAME ................................................................................................................................... 42
APPENDIX C: BUDGET............................................................................................................................................ 42

vi
 ABSTRACT

The study was about the International Financial Reporting Standards and quality of financial
statements used in the Hima Cement Limited in Kasese district as the case study. The report
contains the back ground to the study which specifically talks about the International financial
reporting standards definitions, definitions of financial statements and definitions of quality.
The specific objectives of the study were: To find out the IFRSs used in Hima cement, to establish
factors affecting quality of financial reports of organizations in Uganda and the world at large, to
establish the relationship between IFRSs and the quality of financial reports of organizations in
Uganda.
The study employed cross sectional research design. The sample size was 25 respondents who
were in the accounting department of Hima cement. The main types of data in the study were
primary and secondary data. Data collected was based on the objectives and questionnaires and
interviews were used to collect primary data from the sample of 25 respondents. The information
collected was qualitative and quantitative in nature; it was analyzed using frequency tables only.
The findings of the study were analyzed and presented in this research report, Data analysis was
conducted as simultaneous activity with data collected and data was presented using table,
frequencies and percentages. Most of the respondents were engaged in financial information
keeping, collecting and reporting.
Basing on the reports, the IFRS mostly used by the respondents is International Financial
Reporting Standard 1 because most of the respondents had knowledge on reporting and
presentation of financial statements.
In conclusion, the IFRS used in organizations act as a booster in representing fair and true financial
reports from which financial report users draw their conclusions in business decision. The findings
show that most of the financial controllers are not familiar with most of the accounting standards
used in financial reporting as they are over 35 international financial reporting standards.
From the report, it was recommended that the top management should be involved in providing
quality financial statements not only putting emphasis on company’s performance in terms of
turnover but also in terms of financial reporting. It was also recommended that all those personnel’s
involved in financial reporting should be intensively trained and should be certified accountants,
also the capacity to prepare and present financial statements conforming to accounting standards
need to be exploited other than being kept idle by the company because most of the cashiers are
not producing financial statement

vii
 CHAPTER ONE

INTRODUCTION

1.0. Introduction

This chapter discusses the background to the study, statement of the problem, purpose of the
study, research objectives and questions guiding the study, scope and significance of the study.
1.1. Back ground of the study

Following a recent global transformation, the world’s financial markets have increasingly
become more interlinked. As John Donne’s saying goes, “no man is an island”, in today’s
markets, no investor is now just a national investor. It seems trading or investing in
international financial/securities markets has become a common practice.
Companies/corporations looking to raise or borrow capital are now willing to look beyond their
country’s boundaries.
1.0.
In most countries especially developed ones, many or even all entities have a legal obligation
to prepare financial statements that conform to the required standards or set of accounting
principles that are generally acceptable in that county. Those statutory financial statements are
normally filled with the government agency and are available to creditors, employees, suppliers
among other users of financial statements.

The great majority of these entities are companies or organizations which are publically
accountable especially the multinationals which need greater international uniformity in the
regulations underpinning the preparation of company’s financial statements (frank wood 2002)

UNCTAD’s Intergovernmental Working Group of Experts on International Standards of

Accounting and Reporting (ISAR) has recognized the growing number of member States that
are introducing international financial reporting standards (IFRS) as basis for the preparation
of corporate financial reports by enterprises in their respective jurisdictions. In light of this
development, the Group of Experts devoted substantial time during its recent sessions to
deliberating on the practical challenges that arise in the implementation of IFRS.

For over three decades, the United Nations has contributed to global efforts aimed at promoting
comparable and reliable corporate reports. In 1973, the Secretary-General of the United

2
Nations convened a group of eminent persons that recommended the creation of an
internationally comparable system of standardized accounting and reporting. After a series of
deliberations on this issue, the Economic and Social Council of the United Nations established
the Intergovernmental Working Group of Experts on International Standards of Accounting
and Reporting (ISAR) in October 1982 by resolution 1982/67.
The need for a global set of high-quality financial reporting standards has long been apparent.
The process of international convergence towards a global set of standards started in 1973 when
16 professional accountancy bodies from Australia, Canada, France, Germany, Japan, Mexico,
the Netherlands, the United Kingdom and the United States of America agreed to form the
International Accounting Standards Committee (IASC), which in 2001 was reorganized into
the International Accounting Standards Board (IASB). The IASB develops global standards
and related interpretations that are collectively known as international financial reporting
standards (IFRS).
The process gained speed when the International Organization of Securities Commissions
(IOSCO) endorsed the IASC standards for international listings in May 2000. It was further
facilitated by a regulation approved in the European Union in 2002 required the preparation of
consolidated (group) accounts of listed companies domiciled in the European Union in
accordance with endorsed IFRS. Since then, many more countries have announced their plans
to transition to IFRS, in some instances extending the scope of application beyond group
accounts to legal entities and incorporating IFRS into their national regulatory frameworks.

35% of Uganda’s businesses are 1 to 5 years old according to studies and only 4% are 25 years
or older. (Private sector foundation of Uganda, 2013).
This could most probably be attributed to poor quality financial reporting resulting from non-
or partial IFRS adoption.
The census of business establishments based on “Examining the landscape of Enterprises in
Uganda,” (COBE 2010/11) carried out by Uganda Bureau of Statistics (UBOS); there were
458,106 enterprises in Uganda in 2010.
Uganda adopted the IFRSs for SME in 2009 but statistics are not established for enterprises
that have so far adopted the standard and the wide ranging observation is that adoption levels
are still low.
Zeghal and Mhedhbi (2006) suggested that the decision to adopt IFRS by developing countries,
of which Uganda is included, was influenced by: economic growth, educational levels, and the
degree of external economic openness, cultural considerations and existence of capital markets.

2
Uganda is part of a global village witnessing increased globalisation of the financial markets
and is testing state based regulatory systems.
In 1998, the council of the ICPAU adopted IFRSs (then known as IASs) issued by the
International Accounting Standards Board as the national standards of Uganda. This adoption
was communicated through publication in the national newspaper and also through
communication to the various organisations in the country.
There were effective dates respective to the effect of various IFRSs issued by the International
Accounting Standards Board.
To date, the ICPAU council has not made any changes to IFRSs though it holds that right.
(ICPAU, 21 November 2016).
The basis of preparation of significant accounting policies at Hima cement limited indicate that
financial statements were prepared in accordance with IFRS. The consolidated financial
statements are thus presented in Kenyan shillings.
IAS 12 Income tax amendment, IFRS 7 Financial instruments were reported to be effect less
on performance or position of the Group. The accounting policies were still consistent with
those of the previous years. The effects seen as key due to the IFRSs were highlighted, notably
IAS 40 and IAS 16. Other standards addressed in the report are IAS 19 for employee benefits,
(revised), IAS 28 investments in associates and joint venture (as revised in 2011), IAS 32
offsetting financial assets and financial liabilities – amendment to IAS 32, IFRS 7 disclosures,
offsetting financial assets and financial liabilities – amendments to IFRS 7. IFRS 9 Financial
instruments, classification and measurements, IFRS 10 consolidated financial statements, IAS
27 separate financial statements, IFR 11 joint arrangements, and more. (Bamburi cement
annual report, 2012)

3
1.2. Problem statement

The accountancy profession in Uganda is young, but growing rapidly. The accounting and
auditing practices in Uganda suffer from institutional weaknesses in regulation, compliance,
and enforcement of standards and rules. Various weaknesses were identified in the laws and
regulations governing financial reporting. The Accountants Act (1992) has constrained the
development of an enabling environment for strong accounting practices. The proposed
Accountants Bill (2004) presents some improvements but still has shortcomings. The
Companies Act (1961) is in need of updating, while the Financial Institutions Act (2004) has
significantly improved the regulatory environment for financial reporting by banks and non-
banking financial institutions. The researcher is wondering what the cause could be. Could it
be lack of expertise, the many available IFRS‟s that they cannot be incorporated at once, or is
the information costly and manager’s fear that they will provide a lot of information to
competitors? It is from this background that the researcher is wondering whether the IFRSs for
organizations of public interest are relevant in terms of financial reporting given the fact that
businesses succeed even without quality financial reports.
1.3. Purpose of the study

The purpose of this study is aimed at establishing the relationship between International
Financial Reporting Standards and the quality of financial reports of organizations.
1.4. Specific Objectives of the study

i. To find out the IFRS‟s that are used in Hima cement limited
ii. To establish factors affecting quality of financial reports of organizations in Uganda
iii. To establish the relationship between IFRS‟s and the quality of financial reports

1.5. Research questions

i. What are the IFRS‟s used in Hima cement limited?

ii. What is the factors affecting quality of financial reports of organizations?
iii. What is the relationship between IFRS‟s and the quality of financial reports?
1.6. Scope of the study

1.6.1. Content scope

The study focused on the IFRS‟s adopted and applied by Hima cement limited and the quality
of financial reports and quality that was mainly looked at in terms relevancy, reliability,
comparability, understandability and completeness.

4
1.6.2. Geographical Scope

The study was carried out in Kasese District and covered the management and accounting
department of Hima cement limited. Hima Cement Limited is part of Bamburi Cement Limited
which is a member of the Lafarge group. Lafarge is the leading producer of building materials
in the world. The main factories of the company are located in the town of Hima, in Kasese
District, western Uganda.it lies approximately 29 kilometers (18miles), by road north of Kasese
the nearest large town and it is approximately 334 kilometers (208 miles), by road west of
Kampala, the capital of Uganda and the largest city in the country. The coordinates of the main
factory are: +0o 17’ 12.00”, +30o 10 45.00” E (Latitude: 0.289167; Longitude: 30.179167).
1.6.3. Time Scope

The study covered a period of three months from April to July 2019 and the literature that was
used mainly remains most relevant within the past five years from 2015 to 2019.
1.7. Significance of the study

i. The findings of the study will specifically help the management of Hima Cement to
improve on the quality of their financial reports.
ii. The study will also act as a basis for other researchers in the area of financial
reporting and International Financial Reporting standards.
iii. The study will help the researcher to be awarded a degree of Bachelors of business
computing of Kampala University.
iv. The research will also provide constructive information to employees especially of the
accounting and finance department and audit department to improve on their record
keeping and financial reporting skills.
v. The study findings will be of importance to policy makers on how to improve the
accounting information system of public companies to ensure that all the information
needed by stakeholders is given by the accounting records and financial reports in order
for intended objectives to be achieved.
vi. It is sought to enhance the data collection and analysis skills of the researcher especially
in matters of IFRSs.

5
 CHAPTER TWO

LITERATURE REVIEW

2.0.Introduction

In this chapter, the researcher presents the literature of other authors who wrote about related
subjects. This literature is thus presented with respect to the objective of this research study.
2.1. IFRSs currently used and adopted by Hima cement

limited.

Hima Cement Limited being a public reporting organization has adopted almost all the IFRS
but the researcher has selected the following new and revised international reporting Standards
for the purpose of this literature study.
2.1.1. International Financial Reporting Standard/ international Accounting Standard

(IAS) 1 and presentation of financial statements.

Hima Cement Limited being publically reporting company uses this standard in financial
reporting. This standard has been used by Hima Cement Limited Company for many years ever
since the company was established (Hima cement report). The objective of IAS is to prescribe
the basis for presentation of general purpose financial statements, to ensure comparability both
with the entity's financial statements of previous periods and with the financial statements of
other entities. IAS 1 sets out the overall requirements for the presentation of financial
statements, guidelines for their structure and minimum requirements for their content. (IAS
1.1)
Standards for recognizing, measuring, and disclosing specific transactions are addressed in
other Standards and Interpretations (IAS 1.3)
International Accounting Standard 1applies to all general purpose financial statements based
on International Financial Reporting Standards (IAS 1.2). General purpose financial
statements are those intended to serve users who are not in a position to require financial
reports tailored to their particular information needs (IAS 1.7) (CIMA 2008)
The objective of general purpose financial statements is to provide information about the
financial position, financial performance, and cash flows of an entity that is useful to a wide
range of users in making economic decisions. To meet that objective, financial statements
provide information about an entity's: (IAS 1.9), assets, liabilities, equity income and expenses,

6
including gains and losses, contributions by and distributions to owners and cash flows. That
information, along with other information in the notes, assists users of financial statements in
predicting the entity's future cash flows and, in particular, their timing and certainty.

According to this standard, a complete set of financial statements should include: (IAS 1.10) a
statement of financial position (balance sheet) at the end of the period, a statement of
comprehensive income for the period (or an income statement and a statement of
comprehensive income), a statement of changes in equity for the period, a statement of cash
flows for the period, notes, comprising a summary of accounting policies and other explanatory
notes.

Basing on this standard, an entity applies an accounting policy retrospectively or makes a

retrospective restatement of items in its financial statements, or when it reclassifies items in its
financial statements, it also present a statement of financial position (balance sheet) as at the
beginning of the earliest comparative period.
The company uses titles for the statements other than those stated above as per IAS 1.Reports
that are presented outside of the financial statements including financial reviews by
management, environmental reports, and value added statements are outside the scope of
IFRSs. (IAS 1.14)

According to IAS 1 the financial statements must "present fairly" the financial position,
financial performance and cash flows of an entity. Fair presentation requires the faithful
representation of the effects of transactions, other events, and conditions in accordance with
the definitions and recognition criteria for assets, liabilities, income and expenses set out in the
Framework. The application of IFRSs, with additional disclosure when necessary, is presumed
to result in financial statements that achieve a fair presentation. (IAS 1.15)
IAS 1 requires that an entity whose financial statements comply with IFRSs make an explicit
and unreserved statement of such compliance in the notes. Financial statements shall not be
described as complying with IFRSs unless they comply with all the requirements of IFRSs
(including Interpretations). (IAS 1.16) (CIMA officials 2008)

IAS 1 acknowledges that, in extremely rare circumstances, management may conclude that
compliance with an IFRS requirement would be so misleading that it would conflict with the
objective of financial statements set out in the Framework. In such a case, the entity is required

7
to depart from the IFRS requirement, with detailed disclosure of the nature, reasons, and impact
of the departure. (IAS 1.19-20)

2.1.2. International Financial Reporting standard 3 and presentation of financial

statements.

This IFRS 3 deals with business combinations and companies apply and use this standard in its
financial reporting in order to incorporate its business combinations. IFRS 3 (2008) replaced
IFRS 3 (2004). IFRS 3 (2008) resulted from a joint project with the US Financial Accounting
Standards Board. FASB issued a similar standard in December 2007 (SFAS 141). The revisions
resulted in to a high degree of convergence between IFRSs and US GAAP in these areas,
although some potentially significant differences remained.
A business combination is a transaction or event in which an acquirer obtains control of one or
more businesses. A business is defined as an integrated set of activities and assets that are
capable of being conducted and managed for the purpose of providing a return directly to
investors or other owners, members or participants. (FRS 3). An acquirer must be identified
for all business combinations. (IFRS 3.6)
IFRS 3 does not apply to the formation of a joint venture, combinations of entities or businesses
under common control. The IASB added to its agenda a separate agenda project on Common
Control Transactions in December 2007. Also, IFRS 3 does not apply to the acquisition of an
asset or a group of assets that do not constitute a business. (IFRS 3.2)

Under IFRS 3, Assets and liabilities are measured at their acquisition date fair value (with a
limited number of specified exceptions). (IFRS 3). IFRS 3 allows an accounting policy choice,
available on a transaction by transaction basis, to measure None Controlling Interest either at:
air value (sometimes called the full goodwill method), or the NCI's proportionate share of net
assets of the acquiree (option is available on a transaction by transaction basis).

The acquisition method (called the 'purchase method' in the 2004 version of IFRS 3) is used
for all business combinations. [IFRS 3.4

IFRS 3 on Business Combinations requires companies to value all acquired intangible assets
for their balance sheets. IFRS 3 also demands that brands and other intangible assets are valued
by a company independent of the business and auditors. Intangible Business is an independent

8
brand valuation consultancy and experienced in valuing brands and other in of assets and
liabilities as required.

Intangible Business undertakes a rigorous approach to valuing brands which results in an

objective valuation, suitable for IFRS 3. Clear communication and good relations with the
auditors is essential to ensuring a smooth sign-off process. Intangible Business is experienced
in implementing IFRS 3 and its valuations have been approved by all major international
accountancy firms. All acquired intangible assets must be valued under IFRS 3. Intangible
Business is experienced and knowledgeable in all forms of intangible asset valuation including:
brand valuation, share valuation, customer relationship valuation, copyright valuation, patent
valuation and goodwill valuation. Different techniques may be necessary for each valuation
but the same rigorous approach is applied to all intangible asset valuations under IFRS 3.
Under IFRS 3, goodwill needs to be identified to comply with IFRS 3. Intangible Business can
identify and quantify the components of goodwill, such as the synergies, portfolio effect or
economies of scale that can be extracted from the business combination.
2.1.3. International Financial Reporting Standard 4 and financial reporting.

IFRS 4 is the first guidance from the IASB on accounting for insurance contracts. The Board
issued IFRS 4 because it saw an urgent need for improved disclosures for insurance contracts,
and some improvements to recognition and measurement practices, in time for the adoption of
IFRS by listed companies throughout Europe and elsewhere in 2005 including Uganda.
(ICPAU 2010)
IFRS 4 applies to virtually all insurance contracts (including reinsurance contracts) that an
entity issues and to reinsurance contracts that it holds. (IFRS 4.2) The standard does not apply
to other assets and liabilities of an insurer, such as financial Instruments: Recognition and
Measurement assets and financial liabilities within the scope of IAS 39. (IFRS 4.3)
Furthermore, it does not address accounting by policyholders. (IFRS 4.4).
In 2005, the IASB amended the scope of IAS 39 to include financial guarantee contracts issued.
However, if an issuer of financial guarantee contracts had previously asserted explicitly that it
regards such contracts as insurance contracts and has used accounting applicable to insurance
contracts; the issuer may elect to apply either IAS 39 or IFRS 4 to such financial guarantee
contracts. (IFRS 4.4) (ICPAU 2009)
IFRS 4 contains International Financial Reporting Standards (IFRS) provisions concerned with
the accounting for insurance policies. After a variety of amendments resulting from numerous

9
meetings of the IASB (and FASB) are incorporated, it is expected that the IASB will publish a
working draft for review or a new publication draft for comments in the second quarter of 2012.
The new accounting rules for insurance policies in the IASB draft would artificially create a
significantly higher level of earnings volatility in the insurance industry, thereby creating major
challenges for anyone reading the financial statements. Years of extreme losses would follow
years of extreme profits, and perhaps vice versa. However, one of the key purposes of the
insurance industry is to give policyholders, and accordingly the whole economy, security and
confidence. Confidence is not built by reporting high profits or high losses. Such accounting
would therefore be glaringly inconsistent with the stable business model of the industry.

The standard model used for retirement provisions in the life insurance and nursing care
insurance sectors traditionally includes guaranteed interest. The insurance industry was able to
provide this guaranteed interest even under the highly difficult conditions that existed during
the last financial and economic crisis. Creating artificial volatility would endanger the stability
of business development in the industry and of key retirement provision products.

It is also likely that the changeover to this standard would generate significant additional
expense for the insurance industry. (ICPAU 2011)
2.1.4. International Financial Reporting Standard 10 and financial reporting.

The objective of IFRS 10 is to establish principles for the presentation and preparation of
consolidated financial statements when an entity controls one or more other entities. [IFRS
10:1]
The Standard requires a parent entity (an entity that controls one or more other entities) to
present consolidated financial statements, it defines the principle of control, and establishes
control as the basis for consolidation, it also sets out how to apply the principle of control to
identify whether an investor controls an investee and therefore must consolidate the investee
and also sets out the accounting requirements for the preparation of consolidated financial
statements.
According to this standard, an investor determines whether it is a parent by assessing whether
it controls one or more investees. An investor considers all relevant facts and circumstances
when assessing whether it controls an investee. An investor controls an investee when it is
exposed, or has rights, to variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the investee. (FRS 10:5-6; IFRS 1).

10
According to IFRS 10, a parent prepares consolidated financial statements using uniform
Accounting policies for like transactions and other events in similar circumstances. (IFRS
10:19)

However, a parent needs not to present consolidated financial statements if it meets all of the
following conditions: (IFRS 10:4)

It is a wholly-owned subsidiary or is a partially-owned subsidiary of another entity and its other

owners, including those not otherwise entitled to vote, have been informed about, and do not
object to, the parent not presenting consolidated financial statements.

Its debt or equity instruments are not traded in a public market (a domestic or foreign stock
exchange or an over-the-counter market, including local and regional markets) it did not file,
nor is it in the process of filing, its financial statements with a securities commission or other
regulatory organization for the purpose of issuing any class of instruments in a public market,
and Its ultimate or any intermediate parent of the parent produces consolidated financial
statements available for public use that comply with IFRSs.

A reporting entity includes the income and expenses of a subsidiary in the consolidated
financial statements from the date it gains control until the date when the reporting entity ceases
to control the subsidiary. Income and expenses of the subsidiary are based on the amounts of
the assets and liabilities recognized in the consolidated financial statements at the acquisition
date. (IFRS 10)

The parent and subsidiaries are required to have the same reporting dates, or consolidation
based on additional financial information prepared by subsidiary, unless impracticable. Where
impracticable, the most recent financial statements of the subsidiary are used, adjusted for the
effects of significant transactions or events between the reporting dates of the subsidiary and
consolidated financial statements. The difference between the date of the subsidiary's financial
statements and that of the consolidated financial statements shall be no more than three months
(IFRS 10:92, IFRS 10:93).

11
2.2. Factors affecting the quality of financial statements.

2.2.1. Quality and financial reporting.

The quality of reporting in annual reports has to be taken into consideration to enable users to
make informed decisions. This research investigates factors that influence the quality of
reporting in annual reports for different years by Hima Cement Limited. Specifically, this study
examines the relationship between qualities of financial reports with the International financial
Reporting standards and the general factors that affect financial reporting in Uganda. The
quality of reporting can be explained in different ways. Singhvi & Desai (1971) Suggest that
quality of reporting is the reporting that is complete, accurate and reliable, and Prepared in a
timely manner that leads to quality decision making. Naser and Nuseibeh (2003) contemplate
that quality of financial reporting should be gauged based on the Compliance with accounting
standards of a particular country.

According to Robinson & Munter (2004) the standards refer to quality financial reporting as
an overall financial reporting, including disclosures, which results in a fair presentation of a
company’s operation (including both earnings and cash flow) and financial position. This
definition highlights the usefulness of disclosure quality as it helps in explaining the
companies‟ operation and financial position.

From investors‟ perspective, reporting quality can minimize transaction and capital cost by
reducing the uncertainty of risk and return of their investment (Jensen & Meckling, 1976).The
value and the quality of accounting information are determined by how well it meets the needs
of users. Hence, most accounting research is done presently to assess the usefulness of
information provided by the financial statements. Quality of financial information is affected
by several factors among which, accounting standards as regulatory devices are the most
important factors (Verriest, 2007) since, and quality of accounting standards influences the
users‟ perception of quality of financial information. High quality accounting standards and its
appropriate enforcement are perceived as providing consistent, comparable, relevant and
reliable financial information. Different aspects of accounting quality are studied and
documented in accounting literature.

Although there is no one agreed definition of accounting information quality, different

dimensions of this construct have been operationalized. Most of the recent studies commonly
develop measures of quality using value relevance approach. Value relevance approach can be

12
employed to assess usefulness of accounting information for stockholders. Beaver, (2002)
indicated that the theoretical groundwork of value relevance studies is a combination of
valuation theory plus contextual accounting and financial reporting arguments (accounting
theory) that allows the researcher to predict how accounting variables and other information
relating to market value will behave. Therefore, value relevance approach is an instrument to
estimate quality of accounting information, which is a prime importance to the well-functioning
of the economy (Beuselinck, 2005).
2.2.2. Factors affecting the quality of financial reports.

The financial reports of each organization are affected by different influential factors. As there
is a very small possibility that influential factors of two organizations will be equal, they can
also be considered as generators of national specificities. The level of differences of each
influential factor between organizations implicates the intensity of reporting differences at the
international and organizational level as well as the qualities of financial statements (ksenija
2009).
As a social science, financial reporting is affected by the environment in which it operates, but
at the same time, it is one of the factors impacting on this same environment. This is a fact that
points to the interdependency of reporting and its environment. An organization’s reporting
system is affected by a variety of historical, economic, socio – cultural, institutional, and other
non – Organizations to be exactly the same. Therefore, it can be logically assumed that
affecting the development of an organization’s reporting system are also the generators of
special national traits and, thus, the generators of differences between reporting systems at the
international level. After all, just as countries and organizations have different histories and
political and legal order or even value systems, so will their accounting systems have more or
less differing development and operating model?
In the literature, affirming or refuting the importance of individual factors from the
environment on the development of an organization’s accounting system generally comes
down to citing and describing impact factors, while few efforts have been made to quantifiably
assert these factors or discern their interdependence that would account for the dissimilarities
of reporting systems of countries and organizations based on the susceptibility of accounting
to diverse business environments and such factors include Capital markets; The literature
points to several factors affecting how an accounting system develops and is shaped that could
be grouped under “capital market” as a common denominator. Namely, although
fundamentally different financing systems are involved, in this case the term “capital market”

13
encompasses both the level of development of financial instruments and the globalization level
of a given capital market in a given country.

Differences in financing systems, Business entities within different accounting systems

basically rely on earned capital; their external sources of funding, however, may differ.
Therefore, depending on whether funds are raised by issuing securities or through credit loans
from financial institutions, reporting systems can be characterized as those whose main source
of funding is either the stock market (equity-oriented) (Saudagaran, 2004, 3) or a bank (debt
oriented) (Saudagaran, 2004, 3). In such a context, a capital market, through its attributes,
impacts on organizations. For example: Types of capital markets (Saudagaran, S.M., 2004.);
the relation between business entities and Capital sources (Mueller, Gernon, Meek, 1987.);
Although these business entities are also obliged to make public their financial reports, these
reports differ in their scope of information from the ones previously mentioned thus affecting
the quality of financial reporting as comparability of financial reports with different
organizations will be very difficult and thus inter organization competition will not be effective
(Saudagaran, 2004, 3).

Level of development of capital markets In addition to the mode of funding; the level of
development of capital markets also influences a country’s and organization’s financial
reporting system. Briefly, in systems with developed securities markets, new and more
complex financial instruments emerge that need to be covered and monitored in terms of
accounting, causing changes to the contents of financial reports. Conversely, in systems in
which long-term indebtedness with banks and simple financial instruments prevail, there is no
need for frequent changes to the method of accounting coverage and monitoring to keep abreast
of any possible financial innovations. With regard to the importance and strength of the capital
market as an influential factor, it is necessary to mention the proposal for classifying countries
according to their financing system and, concurrently, to their reporting system.
This is a classification system whose relation between prevailing sources classifies countries
with regard to the difference of funding (securities or loans) and information users who have
either unlimited (“insiders”) or limited (“outsiders”) access to information. In this context,
“outsiders” (Nobes, 1998, 166) refers to those information users who are not board members
and do not enjoy preferential treatment within a business. “Outsiders” include stockholders as
individuals and some of the institutions or other business entities that engage in investment.
Likewise, “insiders” (Nobes, 1998, 166) enjoy close-knit and long term-focused relationships
with businesses in which they have invested, and this gives them an exclusive right to frequent

14
and timely financial information. By placing the types of information users in relation to the
sources of funding, four systems emerge within which countries can be classified companies
are more reliant on grants credit. It usually means banks, whether under the influence of
governments or not; and Credit based systems where financial institutions are dominant
(Nobes, 1998, 166.) The purpose of classification, or classifying accounting systems into
classes or clusters, is grouping of accounting systems according to common characteristics.

If we were to disregard the fact that in any country or organization there probably exist more
than just one of the systems observed (for example, a small family business will be funded
through bank loans, and a large joint-stock company, by issuing stocks and to assume, in
theory, that in each country or organization only one financing system prevails, then the major
portion of countries and organizations would belong to Group I (prevalence of insiders, and
loan – based funding) and to Group IV (prevalence of outsiders, and securities – based
funding). Accordingly, the accounting Systems of Group I countries will be more heavily
focused on protecting creditors, while the Accounting systems of Group IV countries will be
characterized by reporting that focuses on the owners of securities thus affecting reporting
quality because each organization will focus on the needs of its financial users and the quality
of uniformity of financial reports will be highly affected.

The level of globalization of capital markets, finally financial reporting systems are also
influenced by a capital market’s level of globalization, viewed in the context of foreign
businesses entering domestic capital markets. If such business entities are from countries whose
reporting system is characterized by high standards in drawing up and publishing financial
reports, then they will exert a direct influence on raising the general level of financial reporting
in the country they are entering. Likewise, a country’s financial reporting systems will not be
influenced by businesses coming from countries in which high standards are not set for making
and publishing financial reports and because of this influence, the quality of harmonization is
always affected (Saudagaran, 2004, 3).

Financial Reporting systems, in accounting systems in which rules are set based on individual
decisions of precedence (Koletnik, 2001, 6), tax reports are independent of financial reports
that are external user oriented, and is drawn up autonomously and independently of tax
regulations. It is different in countries or organizations whose accounting systems are based on
Roman law that is, where accounting rules are stipulated and fixed by a country’s regulations,
thus leaving them the main common attributes of accounting systems in clusters as well as

15
characteristics which are crucial for their differentiation. Generally, classification is important
for understanding and analyzing significant facts and Formulating relations between them with
little elasticity (Koletnik, 2001, 6). In this case, there is a single reporting system, with minor
differences existing between reporting for tax purposes and reporting for business purposes. In
other words, the association or non-association of accounting reporting with tax and business
purpose will impact on and determine the attributes of the financial reporting system itself.

Legal system, the legal systems of most countries can be classified as systems marked by strict
adherence to laws and regulations (Code law; legalistic; Ugandan law). Hence, in the relevant
literature, this factor is very frequently mentioned in the context of classifying accounting
systems Characteristic of an accounting system influenced by the Ugandan law is the
legalization of Accounting standards and procedures. Prescribed by a country’s regulations,
accounting rules are very detailed and comprehensive, leaving a very small margin for
interpretation and no possibility for improvising. In this type of conservative and inadaptable
system, the role of the accountant consists in literary applying prescribed and detailed legal
requirements, with special emphasis on protecting creditors. This type of legal system is more
adaptable, more innovative and focuses on transparent and timely financial reports, as well as
on the information needs and protection of investors.

Political system and economic relations among countries, the political system as an influential
factor is often mentioned in the literature under the term of colonial inheritance (Nobes, 1998)
and as such, it is considered a major influential factor of accounting systems and reporting
systems alike. The impact of this factor is also evident through history, with invading countries
imposing their political, as well as their accounting system on the countries they have
conquered and colonized. It is also a fact that many countries, upon gaining independence, have
continued to use the same political and accounting system even though it no longer suits their
current needs and economic situation, whereas others have opted for a different political and
accounting system. The influence of a political system is reflected in the strong effect of other
cultures on certain countries because of their size (small), low level of their development or
their previous colonial status. An example, Commonwealth nations‟ accounting systems are
under great influence of British accounting system (Saudagaran, 2004).
The quality of accounting education and the status of the accounting profession, in the
literature, the quality of education in the field of accounting is often referred to as a factor in
the development and design of an accounting system. Various authors agree that this factor, if
lacking, can represent a constraining factor in accounting system development. While the

16
quality of accounting education is directly influenced by a society’s general level of
knowledge, it is also affected by other factors such as the status of the accounting profession
in a country, the level of economic development, economic relations with other countries, and
so on. Accordingly, accounting will not be more than average in countries in which the general
level of knowledge is low. Bringing in accountants from advanced countries or sending
accounting professionals to advanced countries for education is not a perfect solution because
advanced countries may not have or do not have the same accounting system as less developed
countries.

Also, advanced countries have a developed accounting system that is characteristic of large
and complex businesses with complex accounting problems that can only be solved by highly
qualified and skilled accounting professionals. Conversely, because smaller and simpler forms
of business entities prevail in less developed and developing countries, the required level of
accounting education and qualification is lower, and accounting is “primitive” (Mueller,
Gernon, Meek, 1987). Contrary to the reasoning that this factor impacts on the design and
attributes of an accounting system, Nobes (1998) holds a different opinion.

Calling upon the Doupnik, Salter (1995) (Nobes, 1998) theoretical model explaining
accounting differences, Nobes claims that a different level of accounting education is not a
relevant factor in explaining differences because it cannot be used to classify accounting
systems. Accordingly, it could be viewed merely as an outcome of differences among
accounting systems but not as the cause of these differences, and it could possibly serve in
making comparisons between advanced and developing countries. Seen from this perspective,
this factor could be considered within the framework of factors relating to a country’s level of
economic development or to the tradition and strength of the accounting profession (Nobes,
1998).
Regardless of the fact that this factor is linked to other factors, the authors deem that it should
be considered separately, nevertheless. Also perhaps, it is not completely correct to claim that
accounting in less developed countries is “primitive”. In fact, if the accounting needs and
information needs in these countries can be met by a lower level of development of the
accounting system, this does not necessarily need to imply that the country’s accountants are
less skilled but simply that the level of education in the field of accounting is the level required
by the environment in which it operates. On the other hand, improvements to accounting
education could impact on the environment and development of an accounting system, and in
turn on accounting requirements, and, indirectly, on the country itself (Černe, 2007).

17
2.3. Relationship between IFRSs and the quality of

financial statements.

Peter Clarke 2009, if accounting reports are not prepared following the standards(IFRS), then
the meaning of comparisons between performance in different time periods and the
performance between companies are virtually impossible, the publication of IFRS with which
companies must comply, have helped in this regard especially when there’s change in
accounting methods. In such case, accompany will make note of its results using the new and
old accounting methods if no standards in the flow of financial information.
It’s logical to state that companies would adopt accounting policies to portray their financial
statements in the best possible manner. This would reduce the comparability of financial
statements not only for the company over time but also between companies; potential investors
would find it difficult to make rational investment decisions. It’s likely that there would be
major financial scandals occurring regularly. Some investors would lose money heavily as a
result of dubious accounting practices and this would reduce the flow of funds to companies
portraying inability of growth. This in turn could impact on the overall economic performance
and job creation.
In absence of reliable accounting financial information, companies would find it increasingly
difficult to obtain new cash funds from investors and creditors. The only way this problem
would be solved is through the form of regulations. This is Presley what has happened with the
additional regulations being introduced in response to some weakness in the regulatory
environment. The adoption of IFRSs tends to enhance transparency of financial statements,
disclosure and comparability (Biddle and Saudagaran, 1989).
If accounting reports are not prepared following the standards(IFRS), then the meaning of
comparisons between performance in different time periods and the performance between
companies are virtually impossible, the publication of IFRS with which companies must
comply, have helped in this regard especially when there is change in accounting methods. In
such case, a company will make note of its results using the new and old accounting methods
if no standards in the flow of financial information. It’s likely that there would be major
financial scandals occurring regularly if standards were lacking. Some investors would lose
money heavily as a result of dubious accounting practices and this would reduce the flow of
funds to companies portraying inability of growth. This in turn could impact on the overall
economic performance and job creation. In absence of financial reporting, the quality of
relevancy of financial reporting is compromised, (Lewis and Powell 1994) argue that

18
information is relevant if it has capacity to help decision maker to form appropriate,
confirmatory and corrective decisions.

19
 CHAPTER THREE

METHODOLOGY

3.0.Introduction

This chapter provides an operational framework on which data was collected and analyzed. It
describes the study design, study population, sampling techniques, data collection, data quality
control and data analysis.

3.1. Research design

The researcher employed across sectional research design consisting both quantitative and
qualitative research designs. Qualitative design was used to seek attitudes and opinions of
respondents whereas quantitative design was used on numeric and quantifiable data according
to the responses.

3.2. Sampling Design

The study used both purposive and random sampling design in selecting the sample. The
researcher categorized the respondents into five sections to make the sample. The sections were
accountants, auditors, financial managers, administrators, heads of departments and stake
holders. These sections were used because they contain personnel who work and maintain the
accounting system of the company and therefore responsible for the financial reporting and
accountability.

3.3. Study population

The population survey was conducted in Hima Cement Limited; this area was chosen because
it’s where the researcher was interested in finding the data. The study mainly targeted the
accounting staff and administrators of the company’s administrative units with emphasis on
the financial reporting and accountability. Also other workers were used particularly those who
have an inkling on how the accounting system operate. A study population of 25 respondents
was used.

20
3.4. Sample size

This is a representation of the personnel responsible for regulating the accounting system of
the district. The sample size was composed as follows;
Table 1: composition of the sample size

SECTION PROPOSED SIZE PERCENTAGE

Finance committee 05 20%
Office of the CAO 05 20%
Internal Audit 05 20%
Heads of Departments 10 40%
Total 25 100%
Source: Primary Data

3.5. Data collection methods and tools

Only primary data sources were used. Primary data was collected through questionnaires, and
interviews, carried out by the researcher.

3.5.1. Questionnaires

Self-administered questionnaires were used. Questionnaires included both close and open-
ended questions to aid the researcher get the required information to fulfill the objectives of
the study. Open-ended questions were used to capture the qualitative data needed for the study.

Questionnaires were the main and appropriate tool used in collecting data. This is because a
large sample of respondents were reached in the shortest possible time. More so, they were
self-administered. This tool will be used on entirely all the respondents.

3.5.2. Interviews

Face to face interviews were also used to capture information required for the study. However,
this tool was used on only a very few selected officials of the company. These included,
accountants, financial managers, Internal Auditor, administrators, heads of departments and
stake holders.
Interviewing was applied because it enabled the interviewee/respondent add clarity to subject matter as
portrayed in the objectives. Interviews also well enabled the respondents to interact with the researcher
on why this research holds meaning. And more so, data obtained, particularly from semi-structured and
unstructured interviews, was much richer and informative than data obtained from other methods.

21
3.6. Data Quality Control

Data collected conform to the tests of validity and reliability. The validity of the data is
guaranteed because the research tools used in the study were designed to capture all the relevant
information required to fulfill the objectives of the study. Where questionnaires were not
applied, interviews were used to get into deep analysis of the matter and all were confirmed on
observing how things are practically done on ground.

The reliability of data is further confirmed by the approval of data collection methods and tools
by the university through the research supervisor, pre-testing the tools and careful choice of
relevant questions used in the study.
3.7. Procedure for data collection

The researcher was permitted to gather data from Hima Cement limited being the case study
by the university authorities. This was followed by permission from Hima Cement Limited and
the respondents selected for the study. The researcher then arranged for interviews and
personally delivered research questionnaires to the respondents.

Time was arranged in between the period of study to observe how the system is operated
including observing through their books of accounts.

Respondents to the study remain anonymous and their confidentiality preserved.

3.8. Data processing, presentation and analysis

Data collected was first categorized according to the sections selected in the sampling design.
This is because each section had specific procedures and methods used. Data was then
processed using Microsoft excel and word. This involved the use of frequency tables from the
questionnaires. Collected data was edited, classified for completeness, accuracy and
consistency with research objectives.
3.9. Limitations to the study

The researcher encountered the following obstacles to the study;

i) Unreliable and reluctant respondents to give the required information needed. These
affected the quality of data collected. It also became difficult to conduct interviews with
all interviewees proposed.
ii) Time was not sufficient enough to conduct the study thoroughly.

22
iii) The researcher was constrained by finance which affected the quality of the study. The
study was carried 20 miles away from the researcher’s residence.
The researcher was expected to be at the work place as well as at the university studying.
Transport costs to and from between these areas affected the gathering of data.

23
 CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION OF

FINDINGS

4.0.Introduction

This chapter deals with data presentation, analysis and interpretation of findings collected from
the field in attempt to find out whether International Financial Reporting Standards affect the
quality of financial reports in Hima Cement Limited. In presentation of the data, the researcher
used charts and percentages to bring out the characteristics of the data clearly, the data collected
also based on the research objectives to ensure that the research questions were adequately
answered.
4.1. Demographic variables of respondents

4.1.1. Findings on the gender of the respondents.

Table 2: Gender of respondents

Gender Frequency Percentage of respondents

Male 16 64.0
Female 9 36.0
Total 25 100
Source: primary data

Table 2 shows the number of the 25 respondents who completed the questionnaires, 16 (64%)
were male while 9 (36%) were female. The percentage of the male was found to be higher than
that of female implying that the male are more involved in financial reporting than female. This
implied that the female population was not very much involved in financial reporting and were
not much aware of the quality of financial reporting and this implied that the financial reporting
in future is at stake since 36% of the respondents were not involved in financial reporting.

However, men are expected to be tough while women are expected to be gentle. As far as the
presentation of quality financial reports is concerned, the women in general do not differ from
men in their operative behaviors (Donnel, 1980)

24
4.1.2. Findings on the age bracket of the respondents.

Table 3: Age of respondents

Category Frequency Percentage of respondents

18 – 23 7 28.0
24 – 29 2 8.0
30 – 35 8 32
36 – 41 4 16
42 and above 4 16
Total 25 100
Source: primary data
The findings on age of the respondents showed that 7 (28%) were between 18-23 years of age,
2 (8%) were between 24-29years, 8(32%) were between 30-35 years, 4(16%) were found to be
between 36-41 years of age and those above 32 years were 4 (16%). The majority of the
respondents were in the age bracket of 30-36 years.

The implication was that most of the respondents were old enough and understood the
importance of IFRS and the quality of financial statements and this also showed that they had
enough exposure and experience and knowledge in the field of financial reporting.
4.1.3. Findings on the respondents stay in the organization

Table 4: Length of employees stay in the organization

Details Frequency Percentage of respondents
Under 3 years 5 20
3–6 11 44
6–9 7 28
9 and above 2 8
Source: primary data

From the above table, 20(80%) of the respondents had spent more than three years in the
company, 5(20%) of the respondents had spent less than three years in the company.

The implication of the above data was that most of the respondents had worked for Hima
Cement Limited for a long time implying that there was a likely hood for the familiarity with
the company’s policies and application of the International Financial Reporting standards in
their company’s financial statements thus making financial reporting easy and quick due to the

25
exposure and experience in financial reporting and there for the information delivered was
unbiased.
4.1.4. Findings on the level of education attained by the respondents.

Table 5: Education category of respondents

Details Frequency Percentage of respondents

O’level 0 0.0
A’level 2 8.0
Diploma 5 20.0
Degree 14 56.0
Professionals 4 16.0
Total 25 100
Source: primary data
According to the table above, 4(16%) were professionals, 14(56%) were degree holders,
5(20%) were diploma holders while 2(8%) were A level certificate holders. This implied that
the company had enough professionals to apply effectively the International Financial
Reporting Standards thus improving the quality of financial statement since the Professionals
like the ICPAU, CIMA were among the accounting professionals who participated in the study.
Cooke (2000) included efficiency and effectiveness as ingredients of performance apart from
competitiveness and productivity. Cooke further argued that training is the tool to develop
knowledge and skills as a means of increasing individual’s performance in terms of efficiency
and effectiveness.
4.2. Findings on whether the company applied

international financial standards to ensure quality

of financial reports.

In order to know whether the company applied IFRS, the respondents were asked whether the
standards were really applied and below were the major findings about this question.
Table 6: Responses as to whether the company applied IFRS

Details Frequency Percent

Yes 25 100.0

No - -

Source: primary data

26
The above table shows that 100% of the total respondents accepted that International financial
reporting standards were used and applied in Hima Cement Limited. This implied that the
company used and applied the IFRS in financial reporting as indicated by the available
literature as per Hima Cement Limited annual report which indicated that most of these
standards were adopted (Hima Cement Limited Annual Report 2013). And others were to be
applied.
4.2.1. Findings on whether the Company applied all relevant IFRS.

The respondents were asked whether the company applied all the relevant IFRS because the
researcher was interested in finding out if all the relevant IFRS used by the company it being
a public reporting company and below were the findings.
Table 7: Responses on whether all relevant IFRS were applied in Hima cement limited

Details Frequency Percentage of respondents

Yes 20 80.0

No 5 20.0

Total 25 100.0

Source: Primary data

Out of the 25 respondents, 80% agreed that the company applied all relevant IFRS in their
financial reporting while 20% disagreed that the company applied all the relevant IFRS. This
implied that the company applied all the relevant International Financial Reporting Standards.

Based on the available research, in Hima cement Limited annual report 2013, it was indicated
that the company applied all the relevant IFRS in order to improve the quality of financial
reporting standards because the company is a publically reporting limited company. However
20% of the respondents disagreed, this implied that some of the respondent were not aware of
all the IFRS used in the company.

27
4.2.2. Findings on the application of International Financial Reporting Standard 1 in

Hima cement limited.

The researcher was interested in knowing if the company used and applied IFRS 1 which deals
with financial report preparation and presentation and basing on the responses below were the
findings.
Table 8: Responses on the application and use of IFRS 1

Details Frequency Percentage of respondents

Strongly agree 23 92.0

Agree 1 4.0

Disagree 1 4.0

Total 25 100

Source: primary data

According to the findings 92% of the respondents strongly agreed that the company applied
IFRS1 which deals with the preparation and presentation of financial statements while 4% of
the respondent agreed that the company applied and used IFRS 1. This implied that the
company applied IFRS 1 which deals with financial report preparation and presentation. It was
found out that this standard stipulated the preparation and presentation of financial reports, and
available literature showed that the company prepared and presented financial statements
which included the statement of comprehensive income, statement of financial position,
statement of changes in equity and this is because the objective of IFRS 1 is to prescribe the
basis for presentation of general purpose financial statements, to ensure comparability both
with the entity's financial statements of previous periods and with the financial statements of
other entities. IFRS 1 sets out the overall requirements for the presentation. Therefore this
showed that the company applied IFRS 1since it prepared and presented financial reports
(Hima Cement Limited annual financial report 2013).

28
4.2.3. Findings on the application of International Financial Reporting Standard 3 in

Hima cement limited.

The researcher assessed whether the company used and applied IFRS 3 which deals business
combinations and the following table shows the respondents responses about this objective.
Table 9: Responses about the adoption and use of IFRS 3 in the company

Details Frequency Percentage of

respondents
strongly agree 15 60.0
Agree 8 32.0
Disagree 2 8.0
Total 25 100
Source: primary data
From the above findings, 60% of the respondents strongly agreed, 32% of the respondents
agreed, while and 8% of the respondents disagreed that the company applied IFRS 3 which
deals with business combinations. This implied that the company applied IFRS 3 because the
available literature indicated that the company had business ventures that were acquired to
increase its lines of businesses (Hima Cement Limited).

However, some of the respondents did not agree about the use of this standard per harps
because most of the cashiers were not much involved in financial reporting and application of
IFRS since they just reported to the accountants. Otherwise based on internal sources it was
indicated that company used IFRS 3 which deals with insurance contracts, therefore the
company was involved in insuring its assets.

4.2.4. Findings on the application of International Financial Reporting Standard 10

The researcher assessed the adoption and use of IFRS 10 which deals with the controlling
interests of the company and the major findings were as follows.
Table 10: Responses on the adoption and use of IFRS 10 in Hima cement limited.

Details Frequency Percentage of

respondents
strongly agree 15 60.0
Agree 6 24.0
Disagree 2 8.0
Strongly disagree 2 8.0
Total 25 100
Source: primary data

29
The above table shows that 60% of the respondents strongly agreed, 24% of the respondents
agreed, 8% of the respondents disagreed while 8% of the respondents strongly disagreed that
the company used and applied IFRS 10 which deals with controlling interests. This implied
that the company had controlling interests and considered them in financial reporting. This was
traced in the literature review where the company included the incomes and expenses of its
entire subsidiaries in the consolidated financial statements from the date it gained control of
the entities. However some of the respondents were not aware of the use of the IFRS 10 because
this was considered confidential information for only top financial managers. The company
applied this standard in order to establish principles for the presentation and preparation of
consolidated financial statements. (Hima cement Limited annual report 2010)
4.3. Findings on the qualitative characteristics of

financial statements.

The researcher was also interested in finding out the qualitative characteristics that the company’s
financial reports portrayed and below were the major findings.
Table 11: Responses on the qualitative characteristics of the financial statements in Hima
cement limited.

Details Agree Tend to agree Not sure Disagree

f % f % f % f %
Understandability 22 88.0 2 8.0 1 4.0 - -
Relevancy 20 80.0 4 16.0 1 4.0 - -
Omissions, mistakes and error free 15 60.0 8 32.0 1 4.0 1 4.0
Dependability 15 60.0 8 32.0 1 4.0 - -
Faithfulness 17 68.0 5 20.0 3 12.0 - -
Substance and economic reality 17 68.0 5 20.0 3 12.0 - -
Prudent 17 68.0 4 16.0 4 16.0 - -
Comparability 17 68.0 5 20.0 3 12.0 - -
Completeness and materiality 18 72.0 4 16.0 3 12.0 - -
Source: primary data
The above table represents data on the qualitative characteristics of financial statement, 88%
agreed, 8% tend to agreed that financial reports are understandable,4% were not sure and none
of the respondents disagreed about the understandability of financial statements prepared by
company this implied that the financial statements of the company were understandable in
respect to the majority, this implied that the financial statements prepared and presented by the
organization were understood by the user thus making the financial statements of high

30
importance, it also implied that transactions and events could be accounted for and presented
in the financial statements in the manner that was easily understood by users even though a
smaller percentage disagreed but this asserted the quality of relevancy to users as noted by
mike 2010.
The table also shows that 60% agreed, 32% tend to agree and 4% were not sure that the
financial reports prepared by the company were dependable. This implies that financial
statements of the company were dependable and showed faithful and comprehensive financial
information
According to the findings, this implied that the external decision makers could be able to count
on the financial information as sighted by Dyckiman 1998.There were 80% of the respondents
who agreed, 16% tend to agree, 4% were not sure and none of the respondents disagreed about
the relevancy of financial reports basing on the majority of the respondents, the findings
implied the financial statements prepared and presented by most organizations were relevant
to the organization, this implied that the financial information had the capacity to help the
decision makers to form a predictive, confirmatory and corrective decisions as argued by
Pizzey 1993.
From the above table, 72% of the respondents agreed, 16% tend to agree while none of the
respondents disagreed about the qualitative characteristic of completeness of financial
statement this implied the financial statements of Hima cement limited were complete since
they included the statement of comprehensive income, the statement of financial position and
statement of the changes in equity, this implied that the auditors and other financial users could
verify that revenues and expenditures came from legitimate sources. It also implied that the
performance data did not take sluggish results. (Mike Morley 2010)
From the above table, the findings indicated that 68% of the respondents agree, while 20% of
the respondents tend to agree that financial statements prepared and presented by the company
were comparable. This implied that financial statements were of significant importance as they
could be compared for subsequent periods to see the variance in the financial position of the
organization, it also implied that different member entities could be able to evaluate their
performance over a period of time thus asserting the value of consistence as noted by Schultz
and Lopez 2001.

31
4.4. Findings on the relationship between international

financial reporting standards and the quality of

financial statements.

The researcher assessed the relationship between the IFRS and quality of financial reports of
Hima cement limited from the employees of the company, this included responses on the extent
of the relationship between the two, the respondents comments on the relationship and the
findings were as follows.
Table 12: Responses on the extent of the relationship between IAS/IFRS and financial
statements.

Details Frequency Percentage of respondents

To a larger extend 20 80.0
To a smaller extend 2 8.0
I don’t know 3 12.0
Total 25 100

Source: primary source

The findings in the above table show that 80% of the respondents believed that there is a
relationship between the IFRS and the presentation of financial statements to a large extent.8%
believed that the relationship existed to a small extent while 12% of the respondents did not
know whether the relationship existed or not. This implied that the relationship between the
financial reports of Hima cement limited and the IFRS used by the company in the presentation
of financial statements actually existed as per the requirements of the ICPAU.
Table 13: Responses on the comments about the relationship between IFRS and quality of
financial statements.

Details Frequency Percentage of

respondents
Strong and positive 21 84.0
Average 4 16.0
Weak and negative - -
Total 25 100.0
Source: primary data
From the above table, 84% of the respondents agreed that the relationship between the IFRS
and the quality of financial statements was strong and positive, 16% of the respondents believed
that the relationship was average while none of the respondents believed that the relationship
was weak and negative. This implied that the relationship that existed between the financial
reports of Hima cement limited was very strong and positive.

32
 CHAPTER FIVE

DISCUSSION, RECOMMENDATIONS AND CONCLUSIONS

5.0. Introduction

This chapter presents the summary of discussions, conclusions and recommendations of

findings. The summary focuses on the findings in relation to the objectives of the study it
intends to achieve. The summary is followed by conclusions which are also based on the
findings of the study and lastly the recommendations to improve on the quality of financial
reports in Hima cement limited
5.1. Summary of the findings

The research findings include the demographic characteristics of the respondents, the IFRS‟s
adopted and used by Hima cement limited, the factors that affect the quality of financial
statements and the relationship between IFRS‟s and the quality of financial reports.
5.2. Demographic characteristics

Most respondents involved were males with 64% and the females were 36%, among these
respondents, most of them were between the age of 24 and 35 and had stayed for more than
three years in the organization and had at least attained more than a diploma education, in fact
most of the respondents were professionals with 53.3% of the total respondents.
5.3. IFRS’s adopted and applied by Hima Cement

limited.

The findings indicate that the company adopted and used IFRS‟s and that it had adopted most
of the relevant IFRS‟s. From the findings, 96% of the respondents agreed on the adoption and
use of IFRS 1 which deals with preparation and presentation of financial statements.
The findings indicate that 92% of the respondents agreed that the company applied IFRS 3
which deals with reporting about business combinations.
Most of the respondents 88% agreed that the company adopted and used IFRS 10 which deals
with reporting about controlling interests of the company.
The findings indicate that 88% of the total respondents agreed that the company adopted and
used IAS 10 which deals with reporting about events after the balance sheet or reporting period
while 88% of the total respondents also agreed that the company adopted and used IAS 19
which deals with reporting about employee benefits.

33
The findings also indicate that 88% of the total respondents agreed that the company adopted
and used IFRS 40 which deals with reporting investment policies of a company whereas 68%
of the respondents agreed that the company adopted and used IAS 31 which deals with
reporting about the interests in joint ventures of a company.

The findings indicate that 84% of the respondents agreed that the company adopted and used
IFRS 8 which deals with reporting about the company’s operating segments. It was indicated
that a few respondents disagreed about the adoption and use of most of the IFRS / IAS used by
the company and this was due to ignorance of the respondents about the reporting standards.
5.4. Factors affecting the quality of financial statements

It was found out that there were several factors that affected the quality of financial reports.
These factors were ranging from the environment in which the organization was situated in to
the political and legal system that prevailed in the country where the organization was located,
these factors included; level of education of the accountants, nature of the business, the
organizations financial system, countries legal system, capital market development, level of
globalization of capital markets, financial reporting system, political and economic relations of
the country, level of inflation, applying and enforcing legislative regulations in accounting,
achieved level of economic development, size, complexity of business enterprise and business
ownership and the culture of the organization.
5.5. Relationship between IFRS and the quality of

financial statements.

It was found out that there existed a strong positive relationship between the International
Financial Reporting and the quality of financial reports in terms of performance as analyzed by
Correlation coefficient of 0.05. However it was observed that the management of the company
focused more on financial turn over than the quality of financial statements even though the
standards were strictly followed and applied.
5.6. Conclusions

Hima cement limited applies International Financial Reporting accounting Standards in the
presentation of quality financial statements.
Hima cement limited applies International Financial Reporting Standards and presentation of
financial statements and it applies all the relevant IFRS‟s.

34
The company faces in financial reporting and the factors that affect the quality of financial
reports included the level of education of the accountants, nature of the business, the
organizations financial system, countries legal system among other factors.
A positive and strong relationship exists between the International Financial Reporting
Standards and the quality presentation of financial statements, this has led to improvements in
the financial performance in 2014, the Hima cement limited has put more efforts in quality
reliable financial statements by suggesting more IFRS to be applied very soon in order to help
financial users make more effective decisions.
5.7. Recommendations.

Basing on the findings and conclusions made, the following recommendations were sought;
i) The company should seek more use of professionals in accounting in applying the IFRS
in financial statements and presentation.
ii) The top management should be involved in providing quality financial statements not
iii) Only putting emphasis on company’s performance in terms of turnover but also in terms
of financial reporting.
iv) The capacity to prepare and present financial statements conforming to accounting
standards need to be exploited other than being kept idle by the company because most of the
cashiers are not producing financial statements.
v) ICPAU should draw more sensitization programs on use and application of IFRS in
presenting reliable financial statements to avoid users from making inappropriate
decisions.
5.8. Suggested areas for further research.

Further research should be done in the following areas;

i. Roles of International Financial Reporting standards to publically accountable

enterprises
ii. IFRS and creative accounting in financial reporting
iii. Effectiveness of International Financial Reporting standards in enforcing accounting
standards
iv. International Financial Reporting Standards and accounting Laws

35
REFERENCES

Benson (1981) political Leadership and Business

Biddle and saudagaram (1989) transparency, Disclosure and comparability
Catherine Growthrope Financial Analysis May and November 2009 Cima publications Paul
Cerne (2007) accounting requirements Saudagaran (2004) Business enterprise operations
Choi, Muller (1992) Asserting the differences between growing, stable and Lagging economies
Coyle (2003-2004)
Darcy (2001) National Accounting systems
Douplin s. (1995) Theoretical models of explaining Accounting models
Eslservier science limited, Accounting organizations and society
Financial management June 2010 ACCA
Financial management magazine September 2009 CIMA officials Financial management
magazine February 2009 CIMA Officials Brian
Frank wood (2002)
Fundamentals accounting: A practical Approach Omunuk (1999)
Gray (1998) accounting values
International accounting Standards (19970) ICSA London Nkundabanyanga
Jonis (2008-09) Management accounting decision Cima publications
Kaketo D (2005) international accounting standard and financial reporting Makerere
University
Koletnik (2001) financial reporting independency
Ksenija (2009) Quality of financial statements
Naser and Nuseibeh (2003) Compliance with accounting standards Robinson and Munter
(2004) Compliance with Accounting Standards Jenses and Meckling (1976) Uncertainity of
risk and returns of investment Verrienst (2007) Quality of accounting Standards
Mueller, gernon, meek (1987) Influence of economic relations
Mueller, Gernon, Meek (2001) Tax reports and financial independency
Nobles (1998) financial Institutions and financial reporting
Peter Clarke (200), Interpretation of financial statements Chartered association of certified
Rodgers (2008-2009) Financial Analysis Cima officials (2004)

Saudagara (2004) sources of financing in capital markets

36
APPENDICES

APPENDIX A: QUESTIONNAIRE

KAMPALA UNIVERSITY
BACHELORS OF BUSINESS COMPUTING
SCHOOL OF BUSINESS AND MANAGEMENT STUDIES

QUESTIONARE DESIGNED TO GENERATE INFORMATION ON THE EFFECTS

OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs) ON THE
QUALITY OF FINANCIAL STATEMENTS.

Dear respondent,
The questions bellow is aimed at facilitating an academic research on the relevancy IFRSs and
the quality of financial statements particularly reviewing the period 2016-2019. . I therefore,
kindly request you to spare me some of your time to provide answers to enable me complete
my research. The information generated from you will strictly be for academic purposes and
will be handled with high confidentiality

I thank you very much.

Masika Bridget

37
SECTION A
1. PERSONAL DATA
(Please tick and fill in where appropriately)
Sex: Male 
Female 

Age: 18-23 years 

24-29 years 
30-35years 
36-41 years 
42 and above 

Length of stay in the organization Under 3 years 

3-6 years 
7-9 years 
9 and above 

Qualification attained “O” level 

“A” level 
Diploma level 
Degree 

Professional (Please Specify)…………………………………………

38
SECTION B
Objective one: To find out the International financial reporting Standards (IFRS) adopted
and used in Hima cement limited.
The following information relates to IFRS adopted and used by my organization.
The company applies IFRS in financial reporting. (Please tick appropriately)
YES 
NO 

All relevant International Financial Reporting Standards (IFRS) are applied in my organization.

YES 
NO 

The following IFRS are applied in my organization.

Details SA A D SD
IFRS 1 ( preparation and presentation of financial statements)
IFRS 3 (Business combinations)
IFRS 10 (controlling interests)

39
SECTION C: QUALITATIVE CHARACTERISTICS OF FINANCIAL
STATEMENTS

Objective two: To find out the factors affecting the quality of financial reporting in
organizations.

What factors affect the qualitative characteristics of financial statements in your organization?

The financial reports of my company have the following qualitative characteristics (Please tick
appropriately)
Qualitative Agree Tend Not Tend to Disagree
Characteristic to sure disagree
agree
Understandable by its
stakeholders
Relevant to decision-
making needs of users
Is free from material
omissions and
misstatements
Free from error and bias
and can be depended
upon by users to
represent faithfully
what it purports to
represent
Represents faithfully
the transactions and
other events it is
expected to represent
Transactions and other
events are accounted for in
accordance with their
substance and economic
reality not merely their
legal form

Information is not
selected or presented in
such a way that it does
not influence the making
of a decision or judgment
in order to have a
predetermined outcome

40
 Prudent such that there is
inclusion of a degree of
caution in the exercise of
judgments needed in
making the estimates
required under conditions
of uncertainty

Financial statements are

complete within bounds
of materiality and cost

Information is
comparable to that of
other similar
institutions/units and
same accounting policies
are used preparing the
statements

Other(s), specify
……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
……………………………………………………………………………………………………………
………

SECTION D:
Objective three: To establish the relationship between international financial reporting standards
and the quality of financial reports.

The following questions relate to the relationship between International financial reporting standards
and the quality of financial reports
Basing on the performance of your company generally, is there a relationship between IAS/IFRS and
presentation of financial statement? (Please tick appropriately)

I don’t There is
To a larger extend there is To a small extend there is know Relationship

Comment on the relationship above.

………………………………………………………………………………………………………

………………………………………………………………………………………………………
Thank you very much for time, effort and responses.

41
APPENDIX B: TIME FRAME

Month Year Activity

March – April 2019 Proposal writing and presentation
May - june 2019 Data collection
Data processing
July – august 2019 Data analysis and presentation
Printing draft copy
Printing final copy and presentation.

APPENDIX C: BUDGET

ITEM QUANTITY RATE (Ug. Shs) AMOUNT (Ug.shs)

Proposal writing
Stationery 1 ream 10,000 10,000
Typing 1 copy @63 pages 500 @ page 31,500
Printing 2 copies@63 pages 200 @ page 25,200
Photocopying 20 copies @ 5 pages 50 @ page 5,000
Binding 2 copies 2500@ 5,000
Sub total 76,700
Report writing
Printing report 4 copies @ 63 pages 500 @ page 126,000
Binding report 4 copies 2,500 10,000
2 drafts of report @ 63 pages 500 @ page 6,3000
Transport 21 days 3,000 per day 140,000
Lunch 21 days 5,000 per day 105,000
Miscellaneous 20,000
Sub total 243,500

Grand total 320,200

42