Contemporary Accounting Theory: Conceptual Framework and Integrated/Sustainability Reporting

Running head: CONTEMPORARY ACCOUNTING THEORY
Contemporary accounting theory
Name
Institution

CONTEMPORARY ACCOUNTING THEORY 2
Abstract
Executive Summary
Business entities are guided by conceptual frameworks when preparing their financial
reports and statements. Likewise, the changing trends in financial reporting have seen the
stakeholders changing their focus on the items to be included in financial reports. Companies are
now focussing on creating value by forming a positive relationship with their stakeholders. The
increasing need to include non-financial performance in the financial statements have led to the
creation of sustainability reporting as well as integrated reporting. This report exams the two
important components of accounting, that is, the conceptual framework and integrated and
sustainability reporting. Key elements of the two pillars of accounting have been exhausted. The
findings show that although the Australian Accounting Standards Board (AASB) fully support
the IASB's conceptual framework, several issues need to be addressed as listed in the paper.
Likewise, the application of integrated and sustainability reporting at the expense of conventional
financial reporting is slowly gaining momentum as proposed by GRI and IIRC, respectively.
There is evident enough from the annual reports of Oil Search and Vivo Energy companies that
show the application of the conceptual framework, sustainability reporting an integrated
reporting.

CONTEMPORARY ACCOUNTING THEORY 3
Introduction
The report discusses the application of both the Conceptual framework and sustainability/
integrated reporting. The report is divided into two parts. Part A addresses the concept of
financial reporting that was developed and endorsed by the International Accounting Standards
Board (IASB). PART A is further divided into four sections. Section A discusses the
development of the conceptual framework by IASB. Section B discusses the concerns raised by
the Australian Accounting Standards Board (AASB). Section C reviews the concerns raised by
academicians regarding the application of the conceptual framework. And Section D analysis the
application of the concept by the Oil Search Limited 10 Toea to prepare its financial statements.
Part B is divided into five sections to address the importance and adoption of integrated or
sustainability reporting in accounting. Section A is a comparative analysis of sustainability
reporting and integrated reporting. Section B discusses the suitability of conventional accounting
to support the contents of sustainability and integrated reporting. Section C discusses how
theories can be used to support the adoption of sustainability and integrated reporting in
accounting. Section D presents a tabular analysis on the components of an integrated report as
well as the application of Vivo Energy Plc in South Africa. Section E discuss whether or not the
Oil Search Limited 10 Toea Company prepares an integrated report.
PART A: Conceptual framework
a) Development of IASB’s Conceptual Framework for Financial Reporting
IASB has released three versions of the conceptual framework for financial reporting. The
three versions were released in 1989, 2010 and 2018. The three versions were developed based

CONTEMPORARY ACCOUNTING THEORY 4
on the concerns and issues raised by the users about the previous versions. The conceptual
framework remained unchanged since its introduction in 1989. Both the FASB and IASB began
the process of reviewing and revising the concept of financial reporting began in 2004. However,
numerous consultations and disagreement between the two bodies slowed down the work. FASB
and IASB could only finalise Phase A of the project. IASB was forced to abandon their
collaboration with FASB and which show the completion of Phases B to H by September 2010
(IASB, The Conceptual Framework for Financial Reporting, 2010).
However, users of the 2010 conceptual framework cited several drawbacks. For instance,
the 2010 version lacked clear definition and distinction between different financial elements
which are included in the financial statements. Majority of participants raised several conceptual
issues during the 2011 agenda consultation. For instance, participants cited the 2010 concept of
financial reporting hindered the preparation of financial statements and reports. Therefore, in
September 2012, IASB embarked on addressing the conceptual issues that had been raised.
Instead of revision the concept, the board decided to address the topics that had been excluded in
the previous versions. As a result, two topics (disclosure and presentation were added. A finalised
project was published in 2013. The board embarked on collecting views of different users. The
final copy of the conceptual framework was released in May 2018. The 2018 version of the
conceptual framework comprises of eight topics (IASB, Conceptual Framework for Financial
Reporting 2018 , 2018).
b) Concerns raised by Australian accounting professions regarding the application of the
conceptual framework
AASB has raised key concerns about the application of the conceptual framework in
Australia. The two issues revolve around the reporting entity and special purpose financial