Contemporary Accounting Theory and Integrated Reporting

This report discusses the components of conceptual framework for financial reporting and the significance of integrated reporting in contemporary accounting theory. It examines the adoption of accounting standards and the impact on financial reporting quality. The report also analyzes the implementation of integrated reporting frameworks by Monadelphous Group and Barloworld Limited.

Running head: CONTEMPORARY ACCOUNTING THEORY
Contemporary Accounting Theory
Name of the Student
Name of the University

1CONTEMPORARY ACCOUNTING THEORY
Author’s Note

2CONTEMPORARY ACCOUNTING THEORY
Executive Summary
There are two crucial parts of the report which undertakes the discussion on the components
of conceptual framework for financial reporting and sustainability or integrated reporting.
This report states that the intention to adopt a single set of accounting standards was the main
reason behind the adoption of the conceptual framework for financial reporting under the
IASB. However, it needs to be mentioned that the main factors affecting the quality of the
conceptual framework needs to be considered. The report shows that the conceptual
framework has been followed by Monadelphous Group for the purpose of financial reporting.
The second part of the report states that the integrated report of Barloworld Limited has been
developed by complying with the indexes of the IIRC framework for integrated reporting. As
per the findings of the report, the corporate social reporting of Barloworld Limited is more
efficient than the sustainability reporting of Monadelphous Group.

3CONTEMPORARY ACCOUNTING THEORY
Table of Contents
Introduction................................................................................................................................4
Part A.........................................................................................................................................4
Answer to a............................................................................................................................4
Answer to b............................................................................................................................5
Answer to c............................................................................................................................6
Answer to d............................................................................................................................6
Part B..........................................................................................................................................8
Answer to a............................................................................................................................8
Answer to b............................................................................................................................9
Answer to c..........................................................................................................................10
Answer to d..........................................................................................................................11
Answer to e..........................................................................................................................12
Conclusion................................................................................................................................13
References................................................................................................................................14

4CONTEMPORARY ACCOUNTING THEORY
Introduction
This report undertakes the detailed discussion on two crucial aspects of contemporary
accounting; they are Conceptual Framework and sustainability or integrated reporting. The
report can be divided into two portions. The aim of this report’s first portion is to discuss
about different aspects regarding the conceptual framework for financial reporting. The main
aim of the second part of the report is the analysis of crucial accounting frameworks which
are sustainability reporting under GRI Framework and Integrated Reporting under the IIRC.
The selected two companies are Monadelphous Group from Australian and Barloworld
Ltd from South Africa.
Part A
Answer to a
There are certain history for the countries like Australian, US, UK and others behind
their journey towards the adoption of conceptual framework for financial reporting under
IASB (Zhang & Andrew, 2014). In US, the confidence of the investors was lost after the
economic downturn of 1934 and the US authority took the initiative to strengthen their
financial accounting practice through the adoption of a uniform accounting conceptual
framework and thus, responsibility to the FASB was provided by the US Securities and
Exchange for the development of conceptual framework for financial reporting (Alon &
Dwyer, 2014). The reason was different in Australia regarding the development of conceptual
framework for financial reporting under AASB. In Australia, the reason that worked was the
Australian authority’s decision for the adoption of a single set of accounting standard that
would help the country to compete with the rest of the world and thus, Australia adopted the
conceptual framework for financial reporting under the IASB (Macve, 2014). Before the
development of conceptual framework for financial reporting in UK, there was the presence

5CONTEMPORARY ACCOUNTING THEORY
of rules-based accounting standards in the country and this accounting standard did not match
with the accounting standards of rest of the world. For this reason, the UK authority took the
decision to move to principals-based accounting standards with the adoption of the
conceptual framework for financial reporting under the IASB (Jackling, 2013). In case of the
other countries around the globe, the main reason that majorly worked for them for the
adoption of the conceptual framework for financial reporting of the IASB was to maintain
coordination between the accounting standards all over the world. The main benefit of the
conceptual framework for financial reporting of the IASB is that it provides the countries all
over the world with the same accounting standards for the purpose of financial reporting
(Karğın, 2013).
Answer to b
The Australian accounting profession has shown their concern in some of the areas of
the IASB’s conceptual framework for financial reporting. They have shown their concern
regarding the increase in volatility in fair value accounting due to the increase in lobbing
from the introduction of this new conceptual framework for financial reporting (Ryan et al.,
2014). This volatility in fair value accounting has negative effects on the valuation of
intangible assets, financial instruments and others. At the same time, the recognition,
measurement and disclosure processes of the assets and liabilities have been majorly affected
with the IASB’s conceptual framework since this has come with some major changes in these
procedure and the stakeholders of the companies have to face the economic consequences of
these changes (Murphy & O’Connell, 2013). After that, the impact of the IASB’s conceptual
framework has critical impact on the not-for profit organizations of Australia. In most of the
cases, the profit-making listed companies use to adopt the IASB’s conceptual framework.
Since it is the legislative requirement of Australia to develop accounting principles for each

6CONTEMPORARY ACCOUNTING THEORY
sector, there would be major effects on the Australian not-for profit companies due to the
adoption of the IASB’s conceptual framework (Bauer, O'Brien & Saeed, 2014).
Answer to c
According to the academics, providing one single set of accounting principles and
standards is the major benefit of the conceptual framework. However, the academics have
expressed concepts related to the quality of conceptual framework since there are some major
limitations of this (Barker & Penman, 2017). Requirement for large investment and time is
one major limitation of the conceptual framework since this aspects is providing major
difficulties to the developing countries to adopt it (Linsmeier, 2016). After that, the quality of
the conceptual framework is being affected in the presence of major strictness in its standards
where it is almost impossible to include new accounting concepts and ideas in the existing
accounting framework. Moreover, the quality of this conceptual framework is being faceted
in the presence of major clash of its accounting standards with the accounting standards that
are already existed (Barker et al., 2014). It is noteworthy to mention the aspects that this new
conceptual framework of the IASB has not received whole acceptability from all parties and
this aspect is affecting the quality of this conceptual framework in major manner. Thus, it can
be seen that there are some major reasons that are affecting the quality of the conceptual
framework and it is needed for IASB to consider these aspects (Barker, 2015).
Answer to d
i. It needs to be mentioned on the basis of the 2018 Annual Report of Monadelphous
Group that there are five financial statements in this report of the company; they are
consolidated income statement, consolidated statement of comprehensive income,
consolidates statement of financial position, consolidated statement of change in
equity and consolidated statement of cash flows. It is mentioned in the note of the
financial statements that the conceptual framework of the AASB and IFRS issued by

7CONTEMPORARY ACCOUNTING THEORY
the IASB has been used for the preparation of all financial statements. As per these
financial statements, the main components are assets, liabilities, equity, income and
expenses (monadelphous.com.au, 2019).
ii. As per the 2018 Annual Report of Monadelphous Group, the company has done the
recognition and measurement of their revenues at the fair value of the consideration
received or receivable to the extent that there is the probability that the company will
receive the future economic benefit (monadelphous.com.au, 2019).
In case of assets, trade receivables having a term of 30 to 60 days are recognized and
carried at the original invoice amount less any allowance. Inventories are measured at
the aggregate of contract costs. The measurement of the property, plant and
equipment has been done at historical cost less accumulated impairment losses and
accumulated depreciation. Goodwill is initially measured at cost being the surplus of
the fair values of the identified assets and assumed liabilities. Other intangible assets
are recognized initially at fair value and then they are carried at cost less accumulated
amortization and accumulated impairment losses (monadelphous.com.au, 2019).
In case of liabilities, trade and other payables are carried at amortized cost. The initial
recognition of the interest bearing liabilities are done at fair value. Monadelphous
Group classifies their leases in either finance lease or operating lease based on the
lease arrangements. The company recognizes the provisions in the presence of any
obligation due to the any past event (monadelphous.com.au, 2019).
iii. As per the 2018 Annual Report of Monadelphous Group, the company has disclosed
the most relevant information on their assets, liabilities, income, expense and equity
in the financial statements and note to the financial statements. In addition, all the
required accounting standards have been followed by the company for ensuring the
faithful representation of this information (Francis, Pinnuck & Watanabe, 2013).

8CONTEMPORARY ACCOUNTING THEORY
Since Monadelphous Group has provided information for two financial years, it is
possible to compare the disclosed financial information. The presence of notes
increases the verifiability and undestandability of the users of these financial
statements; and these information is provided on timely manner. All these aspects
indicate towards the crucial fact that all the qualitative characteristics of information
exhibit in the financial reports of Monadelphous Group (monadelphous.com.au,
2019).
Part B
Answer to a
There is a common goal of both the sustainability reporting guidelines of GRI and
integrated reporting framework of the IIRC that is to ensure social and environmental
development. However, differences can be seen in the procedures of these two reporting
frameworks. Sustainability reporting of GRI undertakes the effective communication of the
approaches taken by the companies for the reduction of the negative impacts of their business
operations on the society, community and environment (globalreporting.org, 2019). At the
same time, it needs to be mentioned that the integrated reporting leads to the reporting of both
the financial and non-financial information of the companies with the aim to create long-term
value for the shareholders (integratedreporting.org, 2019). Thus, the investors can gain
information on the financial and non-financial performance of the companies from the
integrated reports. At the same time, sustainability reporting helps in demonstrating the
connection between the sustainability related commitments of the companies with their
adopted sustainability strategies.
The above discussion indicates towards the basic differences between sustainability
reporting and integrated reporting. In this context, it is noteworthy to mention the fact that the

9CONTEMPORARY ACCOUNTING THEORY
framework of sustainability reporting plays a crucial role to demonstrate the adopted
strategies of the business organizations for the minimization of different social,
environmental and community related issues (Fernandez-Feijoo, Romero & Ruiz, 2014). On
the other hand, the framework of integrated reporting does the same thing in advanced
manner. The framework of integrated reporting helps in demonstrating the processes in which
the companies create long-term values for their stakeholders through the communication of
information on their financial and non-financial performance (De Villiers, Rinaldi &
Unerman, 2014). For this reason, integrated reporting uses the six capital concept so that all
the aspects of financial as well as non-financial performance can be taken into consideration.
Thus, it can be seen that there are some major differences between these two frameworks that
need to be taken into consideration.
Answer to b
There are certain advantages and limitations of conventional accounting under
sustainability reporting. Increased understanding about the risks and opportunities from the
consideration of the financial and non-financial aspect can be considered as a major
advantage of this conventional accounting system. Under this accounting system as per the
sustainability reporting, it becomes possible for the stakeholders to know about the strategies
of the companies for considering the effects of their business (Junior, Best & Cotter, 2014).
When considering the limitation, it can be seen that conventional accounting under this
framework has the tendency to misinform the external stakeholders due to the major
emphasis that sustainability reporting puts on disclosing the internal performance related
information of the companies (Junior, Best & Cotter, 2014).
Advantages and limitations can also be seen of the conventional accounting under the
framework of integrated reporting. It needs to be mentioned that conventional accounting
under integrated reporting infuses integrated thinking in the whole accounting system that

10CONTEMPORARY ACCOUNTING THEORY
leads to provide clarity as well as transparency on issues and performance of the companies
(Cheng et al., 2014). This leads to improved profitability of the business organization through
providing information on both the financial performance and non-financial performance of
the companies. When considering the limitation, it needs to be mentioned that the companies
are needed to change the process of collecting financial and non-financial data after breaking
down the silos. In addition, accountants under this conventional accounting system face
major difficulties to define the performance measure due to the consideration of both the
financial and non-financial performance of the companies (Cheng et al., 2014).
Answer to c
Some theories can be applied in case of explaining the concept of both integrated
reporting and sustainability reporting.
Integrated Reporting – Both the stakeholder theory and agency theory can be applied to
analyse the content of integrated reporting. As per the stakeholder theory, managements of
the companies are needed to take into account the interest of all the stakeholders in equal
manner, rather than only the shareholders. As per the agency theory, managements of the
firms are the agents of the shareholders and the responsibility of the managements of the
companies is to ensure increasing the shareholder’s wealth. As per these theories, the main
reason for which integrated reporting has been evolved in order to cater to the needs of the
shareholders and other stakeholders to obtain information on firms’ sustainability related
performance (Simnett & Huggins, 2015).
Sustainability Reporting – In case of the sustainability reporting, the applicability of two
theories can be seen; they are legitimacy theory and stakeholder theory. The concept of
legitimacy theory states that the firms use to disclose the information on their environmental
as well as social performance on mandatory basis and this is necessary in order to sustain in

11CONTEMPORARY ACCOUNTING THEORY
the society. On the basis of the concept of above two theories, it can be said that the business
organizations disclose the financial and non-financial performance related information to all
the stakeholders with the aim to ensure their legitimate survival within the societies. This is a
crucial aspect that the companies are needed to consider (Hörisch, Freeman & Schaltegger,
2014).
Answer to d
Integrated Report Index
1. Responsibility – Statement from people charged with governance
2. Strategic Focus – Details of the strategies
3. Stakeholder Relationship – Engagement with the stakeholders
4. Materiality – Details of matters affecting the value creation ability
5. Organizational and External Overview – What the company does and circumstances
6. Governance – Information on governance structure (Adams, 2017)
7. Business Model – Information on adopted business model
8. Risk and Opportunity – Risks and opportunities on the value creation process
9. Performance – Information on achieving strategic objectives
10. Basis of Preparation and Presentation – Basis on which material issues are
determined (Adams, 2017)
(Source: integratedreporting.org, 2019)
Discussion on Barloworld Limited – It can be seen that Barloworld Limited has published
the integrated report of their business for the year 2018 by complying with the IIRC. This
integrated report includes the responsibility statement from the people charged with
governance who are the Chairman, Chief Executive and Finance Director of the company

12CONTEMPORARY ACCOUNTING THEORY
(barloworld-reports.co.za, 2019). After that, details of the strategies are provided under the
head of “Strategy – Managing for value to deliver on our medium-term strategy” in the
integrated report of the firm. After that, Barloworld Limited has disclosed their stakeholder
relationship by disclosing the engagement platforms. Under the section of “Our material
issues”, Barloworld Limited has disclosed the information on their material issues along with
the process of the selection of these issues; it also included the related capital as well as
stakeholders with these issues (barloworld-reports.co.za, 2019). The company has made the
disclosure of their business model that includes key resources and relationships, value chain,
strategic trend impacting their business model, top material risks, our putouts and the impact
on capitals (barloworld-reports.co.za, 2019). After that, Barloworld Limited has made the
effective disclosure of their business risks and opportunities that includes a probability table
along with providing the details of the key risks of which Barloworld Limited is exposed to.
Barloworld Limited has provided their performance for each region against the strategic
objectives. It implies that Barloworld Limited has disclosed all the related information as per
the index (barloworld-reports.co.za, 2019).
Answer to e
It can be seen from the ‘Sustainability’ and ‘Investors’ section of the official website
of Monadelphous Group that the company does not prepare integrated reports. It can also be
seen from the same sections of the annual report that Monadelphous Group does not prepare
any different report for the purpose of corporate social responsibility reporting. There is a
different section in the annual report of Monadelphous Group named ‘Sustainability’ where
the company has provided information in their corporate social responsibility and
sustainability initiative (monadelphous.com.au, 2019).
It can be seen from the 2018 Annual Report of Monadelphous Group that the
company has provided the information on sustainability reporting in three pages of the 2018

13CONTEMPORARY ACCOUNTING THEORY
Annual Report whereas the portion of provided financial information is more than the
sustainability reporting (monadelphous.com.au, 2019). When considering the corporate social
responsibility reporting of Monadelphous Group with the above index, it can be seen that the
company has provided certain crucial information. Monadelphous Group has provided
information on some of the crucial aspects like business strategy, material issues, stakeholder
engagement, risk management and others (monadelphous.com.au, 2019). However, when
comparing the corporate social reporting of Monadelphous Group with Barloworld Limited,
it can be observed that the corporate social reporting of Barloworld Limited is more efficient
than the corporate social reporting of Monadelphous Group because of the adoption of
integrated reporting framework by Barloworld Limited (barloworld-reports.co.za, 2019).
Monadelphous Group has put major focus on the reporting of financial information in this
report, but Marloworld Limited has been able in maintaining a balance between the reporting
of both the financial and non-financial information which is needed for effective financial as
well as corporate social reporting (barloworld-reports.co.za, 2019).
Conclusion
It can be observed from the above that Monadelphous Group has adopted the
principles of the new conceptual framework for the purpose of their financial reporting. The
above discussion shows that there are certain key differences between the frameworks of
sustainability reporting and integrated reporting, but their common goal is the overall
sustainability related development of the companies. According to the above discussion,
Monadelphous Group has not adopted any reporting framework for corporate social reporting
where Barloworld Limited has effectively disclosed their financial as well as non-financial
information due to the adoption of the framework for integrated reporting.

14CONTEMPORARY ACCOUNTING THEORY
References
Adams, C. (2017). Understanding integrated reporting: the concise guide to integrated
thinking and the future of corporate reporting. Routledge.
Alon, A., & Dwyer, P. D. (2014). Early adoption of IFRS as a strategic response to
transnational and local influences. The International Journal of Accounting, 49(3),
348-370.
ANNUAL REPORT 2018. (2019). Retrieved from
https://www.monadelphous.com.au/media/5643586/181015-2018-monadelphous-
annual-report.pdf
Barker, R. (2015). Conservatism, prudence and the IASB's conceptual
framework. Accounting and Business Research, 45(4), 514-538.
Barker, R., & Penman, S. H. (2017). Moving the conceptual framework forward: Accounting
for uncertainty.
Barker, R., Lennard, A., Nobes, C., Trombetta, M., & Walton, P. (2014). Response of the
EAA financial reporting standards committee to the IASB discussion paper A review
of the conceptual framework for financial reporting. Accounting in Europe, 11(2),
149-184.
Barloworld-reports.co.za. (2019). Integrated Report 2018. Retrieved 29 May 2019, from
http://www.barloworld-reports.co.za/integrated-reports/ir-2018/pdf/full-integrated.pdf
Bauer, A. M., O'Brien, P. C., & Saeed, U. (2014). Reliability makes accounting relevant: a
comment on the IASB Conceptual Framework project. Accounting in Europe, 11(2),
211-217.

15CONTEMPORARY ACCOUNTING THEORY
Cheng, M., Green, W., Conradie, P., Konishi, N., & Romi, A. (2014). The international
integrated reporting framework: key issues and future research opportunities. Journal
of International Financial Management & Accounting, 25(1), 90-119.
De Villiers, C., Rinaldi, L., & Unerman, J. (2014). Integrated Reporting: Insights, gaps and
an agenda for future research. Accounting, Auditing & Accountability Journal, 27(7),
1042-1067.
Fernandez-Feijoo, B., Romero, S., & Ruiz, S. (2014). Effect of stakeholders’ pressure on
transparency of sustainability reports within the GRI framework. Journal of business
ethics, 122(1), 53-63.
Francis, J. R., Pinnuck, M. L., & Watanabe, O. (2013). Auditor style and financial statement
comparability. The Accounting Review, 89(2), 605-633.
Hörisch, J., Freeman, R. E., & Schaltegger, S. (2014). Applying stakeholder theory in
sustainability management: Links, similarities, dissimilarities, and a conceptual
framework. Organization & Environment, 27(4), 328-346.
Integratedreporting.org. (2019). Integrated Reporting <IR>. Retrieved 29 May 2019, from
https://integratedreporting.org/
Integratedreporting.org. (2019). THE INTERNATIONAL <IR> FRAMEWORK. Retrieved 29
May 2019, from https://integratedreporting.org/wp-content/uploads/2013/12/13-12-
08-THE-INTERNATIONAL-IR-FRAMEWORK-2-1.pdf
Jackling, B. (2013). Global adoption of International Financial Reporting Standards:
implications for accounting education. Issues in Accounting Education, 28(2), 209-
220.

16CONTEMPORARY ACCOUNTING THEORY
Junior, R. M., Best, P. J., & Cotter, J. (2014). Sustainability reporting and assurance: a
historical analysis on a world-wide phenomenon. Journal of Business Ethics, 120(1),
1-11.
Karğın, S. (2013). The impact of IFRS on the value relevance of accounting information:
Evidence from Turkish firms. International Journal of Economics and Finance, 5(4),
71-80.
Linsmeier, T. J. (2016). Revised model for presentation in statement (s) of financial
performance: Potential implications for measurement in the conceptual
framework. Accounting Horizons, 30(4), 485-498.
Macve, R. (2014). What should be the nature and role of a revised Conceptual Framework for
International Accounting Standards?. China Journal of Accounting Studies, 2(2), 77-
95.
Murphy, T., & O’Connell, V. (2013). Discourses surrounding the evolution of the
IASB/FASB Conceptual Framework: What they reveal about the “living law” of
accounting. Accounting, Organizations and Society, 38(1), 72-91.
Ryan, C., Mack, J., Tooley, S., & Irvine, H. (2014). Do not‐for‐profits need their own
conceptual framework?. Financial Accountability & Management, 30(4), 383-402.
Simnett, R., & Huggins, A. L. (2015). Integrated reporting and assurance: where can research
add value?. Sustainability Accounting, Management and Policy Journal, 6(1), 29-53.
Sustainability Reporting . (2019). Globalreporting.org. Retrieved 29 May 2019, from
https://www.globalreporting.org/information/sustainability-reporting/Pages/
default.aspx

17CONTEMPORARY ACCOUNTING THEORY
Zhang, Y., & Andrew, J. (2014). Financialisation and the conceptual framework. Critical
perspectives on accounting, 25(1), 17-26.