REVENUE RECOGNITION AND BUSINESS GROWTH IN UGANDA.

A CASE OF

IPSOS LIMITED

BY
……………………………………
……………………………………..

A RESEARCH PROPOSAL SUBMITTED TO UGANDA MANAGEMENT

INSTITUTE SCHOOL OF BUSINESS AND MANAGEMENT FULFILLMENT

OF THE REQUIREMENTS FOR THE AWARD OF ……………………. OF

UGANDAMANAGEMENT INSTITUTE

MAY, 2024
 CHAPTER ONE
INTRODUCTION
1.0 Introduction
Business growth is the goal of every business (Funk, 2022). Word over, organizations adopt
different strategies to make their business grow in form of increased revenue and sales
growth, expanding market share, and opening new branches to reach more customers and
markets. Like many other businesses IPSOS Limited pursue business growth through various
strategies but the major one being the way they recognize their revenue by adopting different
methods of recognize their including rata temporis method, sales-basis method and
completed-contract method (Ipsos, 2021). However, in the recent years, the growth at IPSOS
Limited has not been realized as the company continues to register decline in revenue,
decline in sales as of a result of decline in market share (Ipsos, 2021).Therefore, the
researcher will examine the relationship between revenue recognition and business growth at
IPSOS Limited. This chapter presents the background to the study, problem statement,
purpose of the study, research objectives, research questions, research hypotheses, conceptual
framework, significance of the study, the scope of the study and operationalized definitions
of key terms.

1.1 Background to the study:

This section has been looked in perceptive of historical background, theoretical background,
conceptual background and contextual background.
1.1.1 Historical background
The evolution of companies focusing on business growth globally has been profoundly
influenced by globalization trends and technological advancements. Companies are
increasingly expanding their operations across borders to tap into new markets and capitalize
on emerging opportunities (Hitt, Ireland, & Hoskisson, 2020). Strategies for global growth
often involve market entry through exports, foreign direct investment, strategic partnerships,
or mergers and acquisitions (M&A). Successful global companies prioritize adaptation to
local contexts while maintaining global consistency in brand identity and operational
standards (Hitt, Ireland, & Hoskisson, 2020). Companies developed tailored strategies to
penetrate diverse markets worldwide while adhering to international standards of quality and
service.

2
In Africa, the evolution of companies focusing on business growth has been shaped by rapid
urbanization, demographic shifts, and increasing consumer spending power. Companies
operating in Africa face unique challenges related to infrastructure deficiencies, political
instability, and regulatory complexities (African Development Bank, 2022). Strategies for
business growth in Africa often involve investing in market research, building local
partnerships, and adapting products and services to meet the needs of diverse consumer
segments (PanAfrican Consulting Group, 2024). Companies have successfully expanded their
operations across multiple African countries by leveraging their local knowledge and
understanding of the African market dynamics.

In East Africa, the evolution of companies focusing on business growth has been influenced
by regional integration efforts, economic liberalization, and investment in infrastructure
development (African Development Bank Group, 2019). East African companies seek growth
opportunities by expanding into neighboring markets, leveraging regional trade agreements,
and adopting digital technologies to enhance efficiency and competitiveness. Companies
have demonstrated successful regional expansion strategies by diversifying their product
offerings and investing in innovative technologies to cater to the needs of East African
consumers.

In Uganda, the evolution of companies focusing on business growth has been driven by
macroeconomic stability, investment in key sectors such as agriculture and tourism, and
government initiatives to promote private sector development (World Bank Group, 2020).
Ugandan companies pursue growth through diversification, innovation, and strategic
partnerships with local and international stakeholders. At IPSOS, a global market research
company, the focus on business growth has been underscored by its expansion into new
markets and diversification of service offerings. IPSOS has strategically positioned itself as a
leader in the market research industry by leveraging its expertise in data analytics and
consumer insights (IPSOS, n.d.). Through organic growth and strategic acquisitions, IPSOS
has strengthened its global presence and diversified its client portfolio. For example, IPSOS
has expanded its operations in Africa by establishing offices in key markets such as South
Africa, Nigeria, and Kenya and Uganda to capitalize on the continent's growing demand for
market research services.

3
1.1.2 Theoretical perspective
The study will be guided by Resource-Based Theory (RBT). Resource-Based Theory was
initially introduced by Edith Penrose in her seminal work in 1959, "The Theory of the
Growth of the Firm." However, it gained prominence in the 1980s and 1990s, particularly
through the contributions of Jay Barney. RBT conceptualizes firms as bundles of resources
and capabilities, emphasizing the importance of internal assets in achieving competitive
advantage and sustained growth (Penrose, 1959; Barney, 1991). It posits that firms with
valuable, rare, inimitable, and non-substitutable (VRIN) resources are more likely to
outperform competitors over time.

RBT provides a framework for understanding how firms achieve competitive advantage by
leveraging their unique resources and capabilities such revenue recognition. Unlike
traditional industry-based approaches, RBT focuses on the internal factors that drive firm
performance. It highlights the importance of developing and exploiting resources that are
imperfectly imitable, as they can serve as sources of sustained competitive advantage
(Barney, 1991). However, RBT has faced criticism for its lack of specificity in identifying
which resources truly lead to competitive advantage and for neglecting the role of external
factors in shaping firm performance (Hinterhuber, 2013).

In the context of IPSOS Limited, applying RBT to the relationship between revenue
recognition and business growth entails examining how the company's internal resources and
capabilities contribute to its competitive position and revenue generation. By focusing on
internally-driven factors such as organizational processes, technological capabilities, and
human capital, RBT can provide insights into how IPSOS can leverage its resources and
capabilities to enhance revenue recognition practices and drive sustainable business growth.

1.1.3 Conceptual perspective

The study is guided by two variables revenue recognition and business growth. According to
Tuovila (2024) revenue recognition is an accounting principle that outlines the conditions
under which revenue is recognized or recorded in the financial statements of a company. It
determines when revenue should be reported on the income statement, reflecting the amount
of money earned by the company from its core business activities. In this study, it will be
looked at in form of prorata temporis method, sales-basis method and completed-contract
method.
4
According to Killough (2024) prorata Temporis Method is recognizes revenue based on the
passage of time, proportionate to the amount of time that has elapsed during the completion
of a project. It's often used in long-term contracts where the revenue recognition is spread
over the contract period. In this study, it will be looked at inform of time based allocation and
subscription revenue recognition. Then, the sales-basis method recognizes revenue when a
sale is made, regardless of when cash is received (McCool, 2024). In this study, it will be
looked at inform of point of sale recognition and matching principle application. Under the
completed-contract method, revenue and expenses are recognized only after the completion
of the entire project (Syaiful, 2023). This method is typically used when the outcome of a
project cannot be estimated reliably until it's completed. In this study, it will be looked at
inform of deferred revenue & expense and recognition upon completion.

On the other hand, business growth refers to the expansion of a company's operations,
revenue, profits, market share, and other aspects that indicate increasing success and
prosperity (Funk, 2022). However, in this study, business growth will be looked at in form of
revenue growth, sales growth, market share expansion and opening new branches

1.1.4. Contextual perspective

The study will be conducted a IPSOS Limited which is one of the leading global market
research company known for its expertise in providing data-driven insights to businesses and
organizations across various industries (IPSOS, n.d.). Founded in 1975 and headquartered in
Paris, France, IPSOS has grown to become one of the largest market research firms in the
world, operating in more than 90 countries and employing over 16,000 professionals (IPSOS,
n.d.). The company offers a wide range of research services, including opinion polling, social
media analytics, brand tracking, customer satisfaction surveys, and market segmentation
studies (IPSOS, n.d.). In addition to its global reach, IPSOS has established a strong presence
in Africa, with offices in key markets such as South Africa, Nigeria, Kenya, Egypt, Uganda
among others (IPSOS, n.d.). The company's expansion into was Africa reflects its recognition
of the continent's growing importance as a market for consumer goods and services. IPSOS'
local presence enables it to provide clients with valuable insights into African consumer
behavior, market trends, and competitive dynamics.

5
In pursuit of business growth, IPSOS Limited employs various strategies, with a primary
focus on revenue recognition methods. These methods include the prorata temporis, sales-
basis, and completed-contract approaches (Ipsos, 2021, 2023). By prioritizing these key
revenue recognition techniques, IPSOS aims to bolster its market presence, profitability, and
global competitiveness. However, despite these efforts, the company's growth trajectory has
experienced a decline. IPSOS reported a decrease in revenue for the full-year 2020 (Ipsos,
2021), with a further 6.5% decline observed in 2021 on a like-for-like basis. This revenue
downturn progressively lessened throughout the year, initially standing at 9.9% by September
2021 and ultimately stabilizing at 6.5% by December 2021 (Ipsos, 2021). Despite achieving a
modest 1.4% organic growth this figure fell short of the 5% target outlined in the company's
strategic plan (Ipsos, 2021). This prompted the researcher to examine the relationship
between revenue recognition and business growth at IPSOS Limited.

1.2 Problem statement

Companies worldwide aim at business growth (Funk, 2022). This can be achieved including
through increased revenue and sales growth, expanding market share, and opening new
branches to reach more customers and markets. Like many other businesses IPSOS Limited
pursue business growth through various strategies but the major one being the way they
recognize their revenue. IPSOS Limited in adopted different methods of recognize their
including rata temporis method, sales-basis method and completed-contract method (Ipsos,
2021, 2023). By focusing on these key revenue recognition methods, company aim at
enhancing their market presence, profitability, and competitiveness in the global marketplace.
Despite such efforts, the growth at IPSOS Limited in the recent years has been realized.
IPSOS worldwide posted revenue of €1,837.4 million for the full-year 2020, down 8.3% on
2019 (Ipsos, 2021). Revenue in 2021 fell by 6.5% on a like-for-like basis. The extent of this
decline in revenue diminished as the year progressed. It was 9.9% at the end of September
2021 and ultimately 6.5% at the end of December for the full year 2021 (Ipsos, 2021).
Despite the 1.4% organic growth in 2021, it was below the target of 5% in the strategic plan
(Ipsos, 2021). This is hardly a study that has been done to investigate this poor business
growth at IPSOS Limited. Therefore, this prompted the researcher to examine the relationship
between revenue recognition and business growth at IPSOS Limited.

6
1.3 Purpose of the Study
The aim of the study is to examine the relationship between revenue recognition and business
growth at IPSOS Limited

1.4 Specific objectives

i. To establish the relationship between prorata temporis method and business growth at
IPSOS Limited
ii. To examine the relationship between sales-basis method and business growth at
IPSOS Limited
iii. To determine the relationship between completed-contract method and business
growth at IPSOS Limited

1.5 Research Questions

i. What is the relationship between prorata temporis method and business growth at
IPSOS Limited?
ii. What is the relationship between sales-basis method and business growth at IPSOS
Limited?
iii. What is the relationship between completed-contract method and business growth at
IPSOS Limited?

1.6 Research Hypotheses

Ho1: There is no significant relationship between prorata temporis method and business
growth at IPSOS Limited
Ho2: There is no significant relationship between sales-basis method and business growth
at IPSOS Limited
Ho3: There is no significant relationship between completed-contract method and business
growth at IPSOS Limited

1.7 Conceptual Framework

This conceptual framework shows the link between revenue recognition and business growth.
IV (Revenue Recognition) DV (Business Growth)

Prorata Temporis Method

 Time based allocation
 Revenue growth
 Subscription revenue recognition
  Sales growth
Sales-basis method
7
 Point of sale recognition  Market share expansion
 Matching principle application
 Opening new branches
Completed-contract method
 Figure 1: Conceptual Framework
The conceptual framework above illustrates the hypothesized relationship between revenue
recognition and business growth. In the conceptual, revenue recognition is the independent
variable operationalized into prorata temporis method, sales-basis method and completed-
contract method while the dependent variable is business growth manifested in terms of
revenue growth, sales growth, market share expansion and opening new branches. It
hypothesized that proper and clear revenue recognitions leads to increase in business growth
which this study seeks to investigate.

1.8 Significance of the Study

Policy Makers: Understanding how revenue recognition practices impact business growth
may inform policymakers about the effectiveness of current accounting standards and
regulations. It could help policymakers identify areas for potential regulatory improvements
or adjustments to better support business growth and financial reporting transparency across
industries.

IPSOS Limited: For IPSOS Limited specifically, the study's findings may provide valuable
insights into the effectiveness of their revenue recognition practices in driving business
growth. It can help the company identify areas where revenue recognition policies may need
refinement or optimization to better align with growth objectives.

Business Men and Women: Insights from the study may be valuable for other business
leaders and entrepreneurs, helping them understand the relationship between revenue
recognition strategies and business growth. This understanding can guide their own revenue
recognition practices, enabling them to make informed decisions that support their
companies' growth trajectories.

Academia: The study can contribute to academic research by adding to the body of
knowledge on revenue recognition and its implications for business growth. Researchers can
8
use the findings as a basis for further exploration into the mechanisms underlying the
relationship between revenue recognition and business performance.

1.9 Scope of the Study

1.9.1 Content Scope
The study focuses on the examine relationship between revenue recognition and business
growth. The study will specifically explore how prorata temporis method, sales-basis method
and completed-contract method are related to business growth

1.9.2 Geographical Scope

The proposed study will be carried out at IPSOS Limited which is located at 3rd floor Padre
Pio House, Plot 32, Lumumba Avenue. IPSOS limited will be considered because despite
adopting different methods of revenue recognition, business growth has not been realized in
the recent years from 2020.

1.9.3 Time Scope

The t6study scope will cover a period from 2018 to 2023. This period will be considered
because it when IPSOS limited has been facing challenges with its business growth besides
employing different methods of prorata temporis method, sales-basis method and completed-
contract method.
1.10 Operationalized definitions of key terms
Revenue Recognition: This refers to process of formally acknowledging and recording
revenue earned from the sale of goods or services while matching revenue with associated
expenses and recognizing it when it is realized and earned.

Prorata Temporis Method: This refers to revenue recognition based on the proportion of
time elapsed, where revenue is recognized evenly over a specific period according to the
portion of time passed since the inception of a contract or service delivery.

Sales-Basis Method: This refers to revenue recognition occurring only upon the completion
of a sale transaction, wherein revenue is recognized when goods are delivered, services are
rendered, and ownership transfers to the customer.

9
Completed-Contract Method: This refers to revenue recognition deferred until the
completion of a project, whereby revenue and related expenses are recognized in full once the
project is finished, accepted by the customer, and all contractual obligations are fulfilled.

Business Growth: This refers to measurable expansion of a company's operations, reflected

through indicators such as increasing revenue, expanding market share, improving sales, and
acquiring new markets.

REFERENCES
African Development Bank Group. (2019). East Africa Regional Integration Strategy Paper
2020 - 2025.
African Development Bank. (2022). West African Studies: Africa’s Urbanisation Dynamics.
In the economic power of Africa’s Cities. Retrieved from
https://www.afdb.org/sites/default/files/documents/publications/africa_urbanization_d
ynamics-economic_power_of_africa_cities-en.pdf
Funk, P. (2022). Business Growth. [Research paper]. SMC Business School. DOI:
10.6084/m9.figshare.20861410.v1.
Hinterhuber, A. (2013). Can competitive advantage be predicted?: Towards a predictive
definition of competitive advantage in the resource-based view of the firm.
Management Decision, 51(4), 51(4). https://doi.org/10.1108/00251741311326572
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2020). Strategic management: Concepts and
cases: Competitiveness and globalization (13th ed.). Cengage Learning.
Ipsos. (2021). Resilience and Agility: Ipsos Full Year Results 2021. Retrieved from
https://www.ipsos.com/sites/default/files/ct/newsroom/documents/2021-02/ipsos_-
10
 _full_year_results_2021.
Ipsos. (2022). Combined General Shareholders' Meeting Ipsos SA Convening Notice
Brochure AG 2021 English. Retrieved from
https://www.ipsos.com/sites/default/files/2022-04/Brochure%20AG
%202022%20ENGLISH_vfinale_0.pdf
Ipsos. (2023). Market Strategy. Retrieved from https://www.ipsos.com/en-dk/market-
strategy/strategy
IPSOS. (n.d.). About IPSOS. Retrieved from https://www.ipsos.com/en/about-ipsos
Killough, D. (2024). The Percentage of Completion Method Explained. Retrieved from
https://www.procore.com/library/percentage-of-completion
McCool, C. (2024, February 20). Cash Basis Accounting vs. Accrual Accounting. Retrieved
from https://www.bench.co/blog/accounting/cash-vs-accrual-accounting
PanAfrican Consulting Group. (2024). Strategy for a growth business in Africa. LinkedIn.
https://www.linkedin.com/pulse/strategy-growth-business-africa-panafrican-
consulting-group-i0dic/
Syaiful N.(2023). Evaluation of revenue recognition method construction contract PT.
Wahana Multitron. Return Study of Management Economic and Business, 2(1), 14-22.
Tuovila, A. (2024). Revenue Recognition: What It Means in Accounting and the 5 Steps.
Retrieved from: https://www.investopedia.com/terms/r/revenuerecognition.asp
World Bank Group. (2020). Uganda Economic Update: Digital Solutions for Economic
Recovery and Growth.

11