OBU RAP Topic 3: Analyse and evaluate the impact on the financial performance of an organization of a recent change imposed by the regulatory environment

Overview

Any controlled environment comes under the definition of ‘regulatory Environment’. A bunch of rules are made that provide specific conditions that should be taken into consideration to generate satisfactory results and high-quality products. The rules of the regulatory environment keep changing according to the current situation.

The change could be the result of

• Taxation policy
• Legislation
• Industry sector legislation
• Accounting standards

Taxation policy changes can be considered. Any legislative change in the last three years or industry-specific regulatory changes should also be considered. Changes in the accounting standards made by the financial accounting boards of the state that the company is operating in are also studied under this topic

Key features/requirements

The main requirements of the topic are as follows:

• Analysing the changes put in place by the regulatory environment
• Identifying all the financial aspects of the company
• Identifying all the possible impacts of these changes on the performance of the company under consideration
• Analysing the financial performance of the company before the change took place
• Analysing the financial performance of the company after the change took place
• Analysis of the reasons for the specific regulatory change

Key success factors

The main points that are required to be considered to ensure a PASS grade are

• Selecting a suitable company that has recently gone through a regulatory change
• Identifying different changes and conversions made in the selected company
• Detailed knowledge of the regulatory changes being made in the relevant industry
• In-depth knowledge of the new taxation policies, new accounting standards, or any other new legislative change that has made an impact on the functionality of the company
• Critical analysis of the reasons for the specific change that has taken place
• In-depth knowledge of the operations of the company that are under the influence of the proposed regulatory change.
• Analytical assessment of the impact of the change imposed on the different financial aspects of the company
• Adequate application of the selected goals and objectives that were set at the beginning of the RAP in the proper sections of RAP
• The implementation of the correct research methodology to get satisfactory results on all the selected goals and objectives that were put in place at the beginning of the RAP
• Keeping the discussion logical by keeping all the objectives in mind
• Using reliable and appropriate sources for data gathering
• Properly referencing the information gathered according to the Harvard referencing style as told by the OBU.
• Usage of suitable business and accounting models to study various aspects of the regulations and their impacts.
• Present your analysis and conclusion in appropriate form e.g., table, pie charts, or graphs.

Accounting and business models for topic 3

• SWOT: The SWOT model can be used to study the pre and post-effects of the regulatory changes in the environment. It is a situational analysis or assessment that helps us to study the strengths, weaknesses, opportunities, and threats that are related to the company under research.

It covers four aspects that are as follows:

Strengths: This feature relates to all the positive and unique qualities of a company that separates it from its competitors and other industry peers. A successful RAP means that you should consider how the company’s strengths have been affected post the change. Have they increased or decreased?

Weaknesses: This aspect relates to all the areas that are lacking in the company when compared to the other companies in the same sector. The areas that can be improved are also considered.

Opportunities and threats: All the opportunities that can be taken up and all the threats that the company is vulnerable to due to its weaknesses are covered in this aspect. You are required to consider all the pre and post-changes in the opportunities and threats.

• Role of regulation/regulatory environment: Regulation controls the environment that protects the rights of employees and promotes the business to support the overall economic growth. There are many different regulations that authorities put in place to keep the business in check. These can be related to Employment and labour laws, taxes, privacy, state licensing or advertising. If the regulatory control system is not present, then each unit can produce a variation that accumulates through the entire process and then in the end produces a poor-quality product.
• Relevant Ratios: All the relevant ratios that were impacted by the change must be studied under this topic. Financial ratios can be related to profitability, gearing, liquidity, and solvency. Pre and post-changes must be analysed.

For this topic, students can look for all the regulatory changes taking place in the respective company and the reasons for each change.  Avoid using too many models and only stick to the most relevant ones

Major benefits of choosing topic 3

Topic 3 helps in the academic and professional life of the student in many ways

• Students will get to know about the role of regulatory bodies in a working environment
• Students will be able to study all the recent changes that have been imposed by the regulatory bodies
• All the changes related to legislation, taxation policies, the student will learn accounting standards and industry section regulations
• The importance of implementing the changes imposed by the different bodies will be conveyed to students
• A detailed study of all the financial aspects of an organization will equip the students for their professional careers
• Students can apply their theoretical knowledge to real-world problems
• A critical analysis of the company’s operational and financial performance will help to sharpen the required skills needed by an accountant.
• As businesses are subject to tax codes and other environmental regulations regularly, accountants must strengthen their financial resilience. Undertaking RAP on this topic will help the students to understand regulatory compliance and the effects it has on the performance of the business.

Possible limitations faced by the students while researching topic 3

The main aim of conducting research is to set up new facts or confirm the outcomes of the previous research. It enables us to gain new knowledge regarding the subject. However, while preparing for OBU thesis research students face many problems.

Some of the key limitations are as follows:

General Limitations

• Research method: Students need to have a clear understanding of the research methods. The research methods are not relevant or reliable as students are not trained in different methodologies. Simply replicating the knowledge available online or from various sources is not wise. There is a lack of basic knowledge regarding the correct methods of research.
• Reliable secondary sources: there is a ton of information present on the internet for every topic. For the RAP to be successful, students should look through reliable websites, journals and books that can be trusted. Unreliable sources can lead to false information and poor-quality RAP.
• Overlapping information: overlapping information is often obtained because of excessive research through various sources. Each source has its own story to tell. Students often get confused regarding the facts and statements.
• Time constraints: it is without a doubt that students need to complete their RAP before the deadline hits. Sometimes, the time limit can affect the quality of RAP very negatively. Students need to acknowledge this from the very start and set a schedule to be consistent with their research.
• Data collection process: The diverse ways of collecting data present a strong limitation. If a student conducts an interview person to person or if he does it over the phone, both can have different effects on the interview. Hence, this data limitation must be reflected upon

Specific Limitations

• Lack of understanding of legislative changes: Every country has its own legislature so it is possible that students may not understand the legislature changes of a different country.

Suitable organization for topic 3

The most suitable organization is the one which has gone through a regulatory change in the last three years. Selecting a company which is established enough so that its performance and financial position for being studied over a while is necessary. To make a high-quality RAP, it is essential that students choose a company whose operations are easily understood by the student and he can make connections between assorted topics.

The following factors should be kept in mind when choosing a company for RAP:

• The general interest of the students in the company
• The amount of information available for the company
• Access to reliable secondary sources of information
• Familiarity with the industry sector associated with the company

Regulatory changes are quite common in the financial sector and companies cannot escape them in any way. The government is very keen to manage the risk in financial companies and changes are imposed regularly. So, any company relating to the financial sector such as banks and credit unions can be considered for writing a RAP on topic 3.  Moreover, the healthcare industry is the most regulated industry. Students can choose any of the healthcare or pharmaceutical companies to write on this topic.

Suggested approach for topic 3

Before starting your research, you should understand the assignment. The guidelines mentioned in the information pack should be read. The word count and length should be looked upon. What kind of sources are required by the topic, primary or secondary? The style of citation ‘Harvard referencing’ should be understood by the students. All the other requirements and directions made by the OBU must be complied with. After choosing this topic, a proper mind map must be made from the start, so the student conducts all the required tasks in a proper and timely manner. All the major requirements and aspects of the topic should be considered thoroughly so that a strategy can be devised to meet those requirements. A research methodology and all reliable websites and authentic sources should be noted down. The style of referencing must be kept in mind while researching this topic to pass the OBU RAP. A comparison organization might be helpful for topic 3.

In Part 1- (research objectives and overall research approach), Students need to make a table of contents and a title page mentioning the ACCA reg number and the selected topic. Part 1 mostly contains the introduction and the objectives of the RAP. The objectives should be consistent with the research of the project. Your personal aims and goals are not required to be a part of this section. The reasons for selecting the topic must be jotted down. The organization suitable for the selected topic and why that organization was appropriate for the topic.  The aims and objectives of the project should be explained in several ways. Research questions are written in detail, and it targets the specific areas that need to be researched. Usually there are 3 or 4 research questions. Consideration of all these points is important in part 1. If you follow all these instructions, you can move very strongly ahead.

Part 2- (Information gathering/accounting and business techniques) is a very crucial section as all your understanding of the business and accountancy models is analysed here. A quality explanation of the used models or any other frameworks and analysis of all their limitations must be performed. The most structured way of representing section 2 is by first mentioning the sources of information that were used to acquire the data for research on topic 3. Topic 3 relates to regulatory changes so publicly available information can be used. Students are advised to select only those resources that they can understand easily.  Briefly describe all the sources used and why they were considered reliable sources. There are many websites, books and newspapers that can be used. A discussion of the limitations of your information gathering must be included. Students should find references to mention limitations instead of writing from their own opinion. Any ethical issues that arose during information gathering and your solutions regarding the issues. Every part should be backed up by good references. Next, you would list all the business and accountancy models and their limitations. The most suitable models for this topic would be SWOT and a regulatory framework can also be used. To know more details about these models, please refer to the section ‘Accounting and business models for topic 3’.  Word count is to be prioritized which is 1800-2000 words.

In part 3, there is a further evaluation, analysis, and conclusion. Further research with examples and comparisons between the two companies is done. It is the most critical section, and most students fail in it if they are not in the hands of an experienced mentor. To evaluate the financial performance, all the relevant ratios related to the change must be studied. If the change impacted profitability, then this ratio can be calculated. Similarly, if EPS has been affected then it should also be calculated and analysed for increase or decrease. Trend analysis should also be performed. All the ratios must be calculated before and after applying the change. This will help to better study the impact. Graphs, tables, and pie charts can be used to represent results. An effective analysis may comprise of 4500 words.

Suggested approach for SLS

The meetings with the mentor must be planned at the start of the RAP and a track of those meetings must be kept in a diary as it will help later to write the SLS. The time required to conduct effective research needs to be calculated at the start and a timetable should be kept in place. Religiously following the requirements and keeping track of the time is necessary to pass the RAP. All the information gathered should be recorded in a systemic manner and needs to be shared with your project mentor so that complete guidance can be given to you. Consultation with the project mentor ensures that a student passes with the highest possible grade. If any issue arises it can be solved by discussing it with your project guide.

Every student takes his own approach regarding the given topic, and this is only an overly broad version of what can be done. The detailed approach depends on the student’s perception of the topic and the sources of information being used. Whatever approach is taken, the guidance of the project mentor is needed every step of the way to pass RAP with good grades.

Source of information

There are two types of sources that can be used, primary and secondary.

Primary sources are the ones that have been generated by the students themselves to answer the research questions and they can be in the form of interviews, questionnaires, surveys etc. For the primary data acceptance by the OBU, a permission letter from the selected organisation or the participants of the primary data collection must be submitted.

Secondary sources are mostly publicly available information such as websites, journals, books, annual reports, press commentary etc. These can be used well after checking their authenticity and reliability.

In this topic, students are not required to gather information directly from the management which will qualify as a primary source of information. All other sources of information explained above can be utilized for research on topic 3. For using a secondary source, the reliability must be checked and then the information should be put in the RAP. This topic can be covered well only with the help of secondary information. Information in the RAP must be through a relevant source and its content should also be relevant to the topic. The sources of information play a crucial role in producing a good RAP that is based on facts. If reliable sources are not found, then a student must consider choosing a different topic for which information is more easily available.