Tuesday, May 5, 2020

Environmental And Sustainability Reporting Use of Accounting Standar

Question: Describe about the Environmental And Sustainability Reporting for the Use of Accounting Standards. Answer: Introduction Currently, globalization has formulated as the key paradigm to integrate changes across the globe. It has caused an essential influence to result from it over the domain of accounting and finances. Therefore it has resulted in financial system globalization proceedings that further conjoin the standards of auditing and accounting and the standards for International finance reports. This has led towards the making of the essential integration based financial tools with criticality and efficiency (Roberts 2010). The report on sustainability additionally, is in an integrated report form which communicated in a legal and ethical manner, the company related performance perspectives. Under the financial standardization existence, the report on sustainability for organizations is seen as a powerful communication tool that occurs between company based potential stakeholders and also the management. This efficiently helps in exhibiting firm performance with regard to its key objectives of str ategy (Preiato et al 2011). Sustainability reporting integration is something that is valued highly and results in competitive benefit achievement for a firm. This further has an influence over the stakeholders positively. Taking into consideration, the continuous growth in criticality of the reporting on sustainability, this report has been prepared to focus over Australia in order to describe how effective accounting standards have been throughout academic literature researches and with reference to the nation specifically to support sustainable perspectives and reporting by firms. Part A: Current and Potential role of IFRS to support sustainable reporting, Literature Review The meaning of sustainability reporting According to Mariam, (2007), it is a well-known fact that the sustainability consideration challenges exist across every domain in a firm and these have continued to rise within different sectors inclusive of public and privatized etc (Sharpe 2009). Therefore all types of organizations have started to focus over the sustainability reporting initiative. According to the Australian institute of accounting standards, (2012), sustainability report is report development to exhibit the current requirement being met or yet to be met disregard the future constituents destruction or compromise which are needed for meeting the needs of future. According to Jacqualine, (2010), the standards of ACCA perceive to report on sustainability as the potential tool at the level of organization and nation (Apergis et al 2013). This not only results in benefiting firms but also helps in providing a change to the authorities of government prior to them indulging in taking decisions broadly over the society, economy and environment. It has further been depicted that the sustainability concept understands the interdependence features of variables in the economy, environment and society under the future generation influence. The conception is such that it proves its potential at a worldwide level. Sustainability reporting with disclosures of financial and non-financial nature It has been depicted that reporting of sustainability helps in indicating that the data and sources used are authentic. When this data is presented in a systematic way it helps in efficient results over organization present and future progress (Soderstrom et al 2007). Also, there is much efficiency that is gained at organization, domestic and global level for sustainability reporting and this has been verified through the research conducted by Cuadrado- Ballesteros et al, (2005). They highlighted that the existence of finance and non-finance reporting disclosures are further benefited and this in turn helps in sustainability reporting (Tyrrall et al 2007). The association of non-financial disclosures is not with the terms of finances and therefore it does not have any imposition from the standards of finances. However it is considered with influential data domain. On the other hand to this, the reporting of financial sustainability has a direct and essential relationship with standar ds of accounting and finances as it basically expressed financial concepts. There are several authorities providing frameworks and standards to maintain financial statement based sustainability and these are inclusive of IFRS, IAASB, IIRC and GAAP (Apergis et al 2013). These have a focus over correct transaction record integration, integration of values and also operations. All these together form the report on sustainability. It is further inclusive of prices related with carbon emission or emission in the environment, the price related with the measures of protection utilized to maintain the sustainability of environment and society etc. Henceforth under the context of finance related sustainable reporting, the Accounting standards contribution as well as support is evident not only at the domestic level but also at the global level. IFRS to support sustainability reporting All around the world, growing complexities in the organization related environmental sustainability practices has been recognized. Major efforts as a result have been put in through the International Audit and assurance board of standards also known as the IAASB (Ball 2006). This board has approved the corporate sustainability reporting guidelines and the related international standards. Another essential measure has been contributed through the Global reporting initiative with regard to the provision of international standards. This authority according to Jones et al, (2010), has resulted in providing a comprehensive paradigm to report sustainability. The guidelines have also been provided in this inclusive of performance measure reporting along with considering influence with regard to societal stability and environment sustainability (Barbu et al 2014). It is inclusive of the Greenhouse Gas Emission data disclosure, information on costs related with carbon dioxide integration with operations and the certification presence. According to Alpha et al, (2013), however, it has been enunciated that there still are no generally acknowledged global standards that can support sustainable financial reporting economically, environmentally or socially. According to the standards of IFRC, there exist sustainability force worldwide and these factors are totally 10 in number (Barbu et al 2014). The factors include consideration on changes in climate, deforesting, decline in ecosystems, fuel consideration, and energy consideration, security of food, material resource inadequacy, and consistent enhancement in growth of population, higher urban growth, water inadequacy and wealth management provisions. These factors are of much essence and therefore IFRS has considered to support the measures of sustainability through company accountability for the issues in environment. Major organizations furthermore have adopted IFRS across the world in order to compare and replace the standards of financial reports (Brown and Tarca 2005). This has been done because IIRC has made these effective and authentic in relation to competitive success achievement by sustainability reports being published. According to Griffin et al, (2014), it has been depicted that todays approach on sustainability has become the paradigm for behaviour posture. This is essential being taken up through organizations so as to face the challenges growingly and address the associated risks with the business domain competitively and accountably. With regard to measuring the organization responsibilities and effort connected with sustainability, GRI has offered much contribution and also support of comprehensive nature (Brown 2011). Within the globalized concerns, however, it has further ben stated that the standards by IFRS are not only reliable but also adequate to support the companies sustainability determination. The key issue is that it needs longer time when constructing and considering to integrate the standards of IFRS or even GAAP standards take time. Part B: Accounting standards to support sustainability reporting in Australia A constantly growing demand is faced by the Australian organizations from varied stakeholder in order to become more accountable and transparent in regards to the environmental, social and economic performance. There is a wide range of reporting required from the organizations, many of which are asked by central agencies that has resulted in considerable burden for the agencies itself. This is especially the case wherein integration is not in place in the systems of reporting and information of operational management. The associated parties and central agencies usually require information that is similar in nature (Daske and Gebhardt 2006). It is recognized that there is growing requirement for a model to present overall information wherein minute data sets are elaborated for individual area of needed reporting of performance (involving corporate, economic, people and services) and that is in alignment with the management reporting at the levels of pubic, central and agency (Chen et al 2010). It is ideal that information is collected once and used numerously that is derives from the operating systems of departments to ensure seamless use for the purposes of public reporting. All of this need common standardization and definition. Crucial role is played by sustainability reporting for the agencies of Australia in allowing accountability and transparency while the processes of reporting are streamlined (Epstein et al 2008). It is considered that addition of more information for reporting is not the concern, the primary use is about connections making as well as encouragement in thinking that is holistic. This can have an advantage in clutter removal and reduction of the overall burden associated with reporting. Quality and value can be added by the sustainability reporting to the information of management, this ensures the disclosure of information related to pivotal performance. An imminent role can be played by the sustainability reporting and measures in getti ng done that is measured (Epsten et al 2010). The availability of sustainability metrics further helps in integrating sustainability issues within the processes of decision making. Organizations are assisted through the sustainability reporting in various reporting that exists and tasks of management for an example, strategic planning, efficiency of operations, customer service, labour relations, management of stakeholder, workforce managing as well as management of environment. There is possibility for aligning most of the required reporting by agencies with the disclosure items of Global Reporting Initiative (GRI). Bride between several disclosures are provided by the sustainability reporting (Fontes et al 2005). Organizations can be assisted through the Sustainability reporting framework of GRI in understanding of the associated among governmental strategies and policies, outcomes and operational impacts. Sustainability reporting framework developed by GRI involves guidelines for sustainability reporting, sector supplements, protocols of boundary and technical and the national annexes. The framework of sustainability reporting also intends to works as a framework that is generally accepted for organizational reporting of economic, social and environmental performance (Gray et al 2012). It is prepared in such a manner that organizations of any industry, size or location can utilize it. The practical considerations are taken into account that were experienced by the organizations of diverse range, including smaller firms to the organizations with operations dispersed geographically and extensively. The framework of sustainability reporting was developed with the use of process which looks for consensus by dialogue among business stakeholders, labor, community of investor, civil society, academia and accounting with others (Gray 2010). The framework of GRI also provided foundation for the guidelines for sustainability reporting which is present in the third generation currently. Sustainability disclosure are features which can be adopted by organizations incrementally and flexibly allowing it to maintain transparency in regards to their performance in the areas of key sustainability (Guthrie et al 2009). The most complete and latest version of sustainability reporting guidelines are G3.1. This version was launched in the year of 2011 completing the G3 guidelines content which was released in the year of 2006. The guidance was expanded in the G3.1 on the impact of local community, gender and human rights. The guidelines of fourth generation that is G4 is presently under developme nt. (Guidelines on sustainability reporting by GRI, Australia) (Iatridis 2010) A determination is necessary to make in regards to the content that report needs to cover to ensure that performance of organization is presented in a reasonable and balanced manner. This determination is to be made with consideration of the both experience and purpose of the organization along with the interest and expectations of the stakeholder of the concerned organization. In deciding the inclusions to be made in report, both are considered as reference points that are important (Kent et al 2008). The GRI does not expect that the organizations which are reporting will include and report of all standardized disclosures and indicators, it is implies that the organizations will identify the suitability of the content in the report as per their audience and organization itself. The primary components of reporting as per the guidance of GRI facilitation involves the following (Kolk 2013): The sustainability reporting principles of stakeholder inclusiveness, materiality, context of sustainability, and completeness assists in determination of the reporting elements. Applying these defined principles along with the disclosures of standard determines the indicators as well as the topics to be included in reporting (Iatridis et al 2010). The principle reporting elements of comparability, balance, timeliness, accuracy, clarity and reliability enabling achievement of required quality of information being reported. Providing guidance for the organizations that will report in terms of defining the entities range to be represented within reporting (Kolk 2012). This is also referred to as report boundary. Information is identified by the guidelines which is material and relevance to majority of organizations as well as interest majority of stakeholders in reporting the standard disclosures of three forms: Profile and Strategy: Involves disclosures which defined the overall context for organizational performance understanding like its governance, profile and strategy. Approach of Management: Disclosures covering the manner in which organization address the topics within given set in providing the context for understanding of specific areas performance (Li 2010) Indicators of Performance: Such indicators which elicit information to be comparable in the context of organizational social, environmental and economic performance. Sustainability reporting in Australia is voluntary. Organizations that opts to deliver sustainability reporting chooses the same because of the extent of following reasons: Providing information to the stakeholders that non-shareholders including employees and consumers in regards to the environmental as well as social impact of the organizational performance along with placed strategies or under development for improvisation of such impacts (Pannanen et al 2011). Assisting investors, shareholders along with the market in determination of the manner in which organizations are operating with risks of financial and non-financial kind. Allowing the organizations to achieve the following: Identification of improvement areas within operations and/or management; Identification and improvised management of the associated non-financial risks Identifying newer areas of market and opportunities of business Benchmarking of the performance against their rival organizations Improvisation of their reputation and their brand name (Parker et al 2011) Recruitment and retention of staff with high caliber According to the report of Certified Practicing Accountants Australia (CPA Australia), Sustainability including potential practice and performance, there is a strong link present among the sustainability reporting and corporate distress low probability. The following findings were submitted by CPA Australia: This relation implies that organizations issuing sustainability reports possess higher awareness of the risk in wider range which might impact the business and displays that long termed and higher holistic approach to complex management of risk results in rewarding both the stakeholders as well as shareholders (Preiato et al 2011). Preparation for sustainability reports are undertaken to deliver non-financial information to the numerous stakeholders of the organization (Roberts 2010). As per the recent survey conducted by the Centre for Australian Ethical Research (CAER) on sustainability reporting, the primary audience of target for sustainability reporting are 87 per cent employees, 79 per cent consumers, 74 per cent shareholders, 67 per cent local community, 54 per cent investors that are institutional, 54 per cent suppliers, 59 per cent analysts and 28 per cent of the NGOs and governments. Impediment that is major in sustainability reporting uptake is the associated resources and cost with their preparation (Sharpe 2009). The CAER report also indicated that majority of the respondents (78 per cent) considered resource and cost constraints as the barrier in sustainability reporting. For an example, $150,000 was quoted by Wesfarmers including auditing and printing but excluding the cost associated with time of the staff. Flexibility was identified as the primary principle within the sustainability reporting in order to fulfill the diverse need of the Australian business community. Best practice recommendations and Good Corporate Governance of the ASX Corporate Governance Council showcases an appropriate flexible approach example. The ASX council recommendations imply that the complexity, size and operations of organizations vary due to which flexibility should be provided in the adopted structures for the purpose of optimization of their individualized performance (Soder strom et al 2007). It is emphasized that the flexibility should in combination with accountability, as the obligation will be present to explain investors in regards to alternative approach being adopted. Under the new guidelines of corporate governance, the public organizations are required to disclose the exposure to risks related to economic, social and environmental sustainability. These principles have surfaced for the first time post global financial crisis as the organizations were not needed to mention non-financial risks previously. Conclusion From the perspective of this report, it is evident that a major role is played by accounting standards such as GRI and IFRS in relation to sustainability reporting. The growing concerns on sustainability have led towards driving this change. There were 2 essential parts in this report. The first part has addressed a comprehensive research in the domain and has clearly outlines the support that sustainability reporting has gained. It was analysed that there are some concerns of profitability that companies face and they have to undertake the concerns of sustainability (Van Greuning et al 2011). With the presence of guiding factors and guidelines, it becomes possible for organizations to report sustainability in the most appropriate manner. Continuously there are boards such as SASB, IIRC and also IASB which are working collaboratively for IFRS integration within companies. This will help companies to generate effectively and efficiently their reports on sustainability and deal with th e challenges in economy, environment and society. Part B on the other hand, of this report has brought forwards the use of accounting standards to support sustainability reporting within the context of Australia. In Australia, the accounting standards have proved to be of much benefit. The professional accountants have also indulged to understand the issues involved in sustainability reporting (Tyrrall et al 2007). Looking at these issues, the accounting initiatives have been designed by them in order to put forwards appropriate value to the process of sustainability reporting. With such a provision, success has been gained to a higher level in sustainability reporting by Australian firms at all levels. References Apergis, N, Eleftheriou, S, Payne, JE 2013, 'Analysis: The relationship between international sustainability reporting standards, carbon emissions, and RD expenditures: Evidence from European manufacturing firms',Ecological Economics, vol. 88, no. Transaction Costs and Environmental Policy, pp. 57-66. Ball, R., 2006. International Financial Reporting Standards (IFRS): pros and cons for investors.Accounting and business research,36(sup1), pp.5-27. Barbu, E.M., Dumontier, P., Feleaga, N. and Feleaga, L., 2014. A proposal of an international environmental reporting grid: What interest for policymakers, regulatory bodies, companies, and researchers?: Reply to discussion of mandatory environmental disclosures by companies complying with IAS/IFRS: The Case of France, Germany and the UK.The International Journal of Accounting,49(2), pp.253-262. Barbu, E.M., Dumontier, P., Feleagă, N. and Feleagă, L., 2014. Mandatory environmental disclosures by companies complying with IASs/IFRSs: The cases of France, Germany, and the UK.The International Journal of Accounting,49(2), pp.231-247. Brown, P. and Tarca, A., 2005. A commentary on issues relating to the enforcement of International Financial Reporting Standards in the EU.European Accounting Review,14(1), pp.181-212. Brown, P., 2011. International Financial Reporting Standards: what are the benefits?.Accounting and business research,41(3), pp.269-285. Chen, H., Tang, Q., Jiang, Y. and Lin, Z., 2010. The role of international financial reporting standards in accounting quality: Evidence from the European Union.Journal of International Financial Management Accounting,21(3), pp.220-278. Daske, H. and Gebhardt, G., 2006. International financial reporting standards and experts perceptions of disclosure quality.Abacus,42(3à ¢Ã¢â€š ¬Ã‚ 4), pp.461-498. Epstein, B.J. and Jermakowicz, E.K., 2008.Wiley IFRS 2008: Interpretation and Application of International Accounting and Financial Reporting Standards 2008. John Wiley Sons. Epstein, B.J. and Jermakowicz, E.K., 2010.WILEY Interpretation and Application of International Financial Reporting Standards 2010. John Wiley Sons. Fontes, A., Rodrigues, L.L. and Craig, R., 2005, December. Measuring convergence of national accounting standards with international financial reporting standards. InAccounting forum(Vol. 29, No. 4, pp. 415-436). Elsevier. Gray, R. and Milne, M., 2012. Sustainability reporting: who's kidding whom?.Chartered Accountants Journal of New Zealand,81(6), pp.66-70. Gray, R., 2010. Social, environmental and sustainability reporting and organizational value creation? Whose value? Whose creation?.Accounting, Auditing Accountability Journal,19(6), pp.793-819. Guthrie, J. and Farneti, F., 2009. GRI sustainability reporting by Australian public sector organizations.Public Money and management,28(6), pp.361-366. Iatridis, G. and Rouvolis, S., 2010. The post-adoption effects of the implementation of International Financial Reporting Standards in Greece.Journal of international accounting, auditing and taxation,19(1), pp.55-65. Iatridis, G., 2010. International Financial Reporting Standards and the quality of financial statement information.International Review of Financial Analysis,19(3), pp.193-204. Kent, P. and Stewart, J., 2008. Corporate governance and disclosures on the transition to international financial reporting standards.Accounting Finance,48(4), pp.649-671. Kolk, A., 2013. Trends in sustainability reporting by the Fortune Global 250.Business strategy and the environment,12(5), pp.279-291. olk, A., 2012. A decade of sustainability reporting: developments and significance.International Journal of Environment and Sustainable Development,3(1), pp.51-64. Li, S., 2010. Does mandatory adoption of International Financial Reporting Standards in the European Union reduce the cost of equity capital?.The accounting review,85(2), pp.607-636. Pannanen, M. Lin, H., 2011, The Development of Accounting Quality of IAS and IFRS over Time: The Case of Germany", Journal of International Accounting Research, Vol. 8 No. 1, pp. 31-55. Parker, R. Morris, R., 2011, "The Influence of US GAAP on the Harmony of Accounting Measurement Policies of Large Companies in the UK and Australia", Abacus, Vol. 37 No. 3, pp. 297-328. Preiato, J. Tarca, A., 2011, IFRS adoption, analysts and institutional setting, AFAANZ Annual Conference, Adelaide, Australia. Roberts, E., 2010, "In defence of the survey method: An illustration from a study of user information satisfaction", Accounting and Finance, Vol. 39 No. 1, pp. 53-77. Sharpe, M., 2009, "Is Australia Moving Too Far Ahead of the United States in the Convergence to International Accounting Standards?", Australian Accounting Review, Vol. 9 No. 3, pp. 69-72. Soderstrom, N. Un, K., 2007, IFRS Adoption and Accounting Quality: A Review, European Accounting Review, Vol. 16 No. 4, pp. 675-702. Tyrrall, D., Woodward, D. and Rakhimbekova, A., 2007. The relevance of International Financial Reporting Standards to a developing country: Evidence from Kazakhstan.The International Journal of Accounting,42(1), pp.82-110. Van Greuning, H., Scott, D. and Terblanche, S., 2011.International financial reporting standards: a practical guide. World Bank Publications.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.