The implementation of International Accounting Standard 32 Financial Instruments:
Disclosure and Presentation (lAS 32), International Accounting Standard 39 Financial
Instruments: Recognition and Measurement (lAS 39) and International Financial Reporting
Standard 7 Financial Instruments: Disclosures (IFRS 7) by developing countries has been
met with mixed reactions largely due to the extensive use of the fair value concept by the
three accounting standards. The use of the fair value concept in developing countries has
proved to be a significant challenge due to either a Jack of formal capital market systems
or very thinly traded capital markets. This study investigates the obstacles to determining
fair values of equity share investments, government bonds and corporate bonds, treasury
bills and loan advances in Mozambique.
The study was done through a combination of literature review and empirical research
using a questionnaire. The trading statistics of the financial instruments on the
Mozambique Stock Exchange and the prospectuses of bonds were used. The empirical
research was carried out using a type of non-probability sampling technique called
purposive sampling. A subcategory of purposive sampling called expert sampling was
used to select the eventual sample which was composed of people with specialised
knowledge on the capital market system in Mozambique. The results of the empirical
research were analysed using pie charts to summarise the responses.
The research concluded that the Mozambique Stock Exchange is an inactive market for
financial instruments characterised by thin trading in both equity shares and bonds. The
estimation of fair values evidenced by observable market transactions is therefore
impossible. The absence of credit rating agencies in Mozambique presents a significant
challenge in assigning credit risk and pricing financial instruments such as bonds. The
research also noted that significant volatility of the main economic indicators such as
treasury bills interest rates and inflation made it difficult to determine fair values of financial
instruments using financial modelling techniques. Due to the above obstacles to
determining fair values of certain financial instruments in Mozambique, the best
alternatives are to value these financial instruments at either cost or amortised cost. / Financial Accounting / M. Com. (Accounting)
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:unisa/oai:uir.unisa.ac.za:10500/1273 |
| Date | 01 1900 |
| Creators | Munjanja, Innocent |
| Contributors | Wingard, H. C. (Prof.), Cronjé, Christo Johannes |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Dissertation |
| Format | 1 online resource (x, 167 leaves) |
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