eThesis - School of Business electronic theses

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Objectives of the Study:

The aim of the research is to study the impact of the IFRS 17 Leases standard change on the Financial Communication function of a selected Finnish stock listed multinational coined Company X. The standard change is part of a wider endeavor to harmonize financial reporting across the world and will considerably affect the financial position of companies that currently engage in operative leasing. The study addresses the effects of the standard change on the providers and users of Financial Communication to answer the main research question: 'What are the expected effects of IFRS 17 Leases standard change on the Financial Communication function of Company X?'

Methodology and the Theoretical Framework:

The study is conducted using a qualitative research method. Data collection is done through 6 semi-structured interviews. The interviewees represent a wide range of expertise in Financial Communication, Controlling, Auditing and Accounting Advisory as well as Equity Analysis and Research. The Theoretical Framework is adapted from theories of Corporate Governance as well as Strategic and Integrated Communication. The Theoretical Framework addresses the inputs, the organizational process and the outputs of a Financial Communication endeavor. Financial Communication is inherently a cross functional discipline, combining financial management and strategic communication to directly contribute to a company's 'purpose of being'.

Findings and Conclusions:

The findings of the study show that analysts face considerable challenges in valuing Company X. These challenges are likely to be accentuated by the change in the IFRS 17 Leases standard, due to the standard change representing an additional level of uncertainty, without addressing the sources of the valuation challenges. This finding emphasizes the importance of proactive Financial Communication. The study also finds that Company X's Financial Communication is of a high standard but at times unstructured, especially during transition. An 'ad hoc' approach to issue management combined with stakeholders' differing levels of awareness, understanding and scrutiny of changes in accounting regulations and principles may create challenges to Company X's Financial Communication efforts. Similarly challenges arise from the implementation and interpretation of the new standard as well as the administration of lease contracts. A reconciliation bridge between the old and new IFRS 17 Leases standards will more likely than not be required, along with a Financial Communication Strategy that supports it. However, the IFRS 17 Leases change also provides an opportunity for Company X as the new requirements are likely to emphasize the benefits of providing value adding information to stakeholders. Recommendations were given to address various stakeholders in a more structured and proactive manner.