Contemporary Accounting Theory

This report sheds light on two crucial aspects of accounting and they are Conceptual Framework for Financial Reporting and Integrated or Sustainability Reporting. As per the findings of the first part of the report, countries all over the world adopted the conceptual framework for financial reporting of IFRS under IASB in order to make sure that they have a single set of accounting standards for the purpose of accounting harmonization.

Running head: CONTEMPORARY ACCOUNTING THEORY
Contemporary Accounting Theory
Name of the Student
Name of the University
Author’s Note

1CONTEMPORARY ACCOUNTING THEORY
Executive Summary
This report sheds light on two crucial aspects of accounting and they are Conceptual
Framework for Financial Reporting and Integrated or Sustainability Reporting. As per the
findings of the first part of the report, countries all over the world adopted the conceptual
framework for financial reporting of IFRS under IASB in order to make sure that they have a
single set of accounting standards for the purpose of accounting harmonization. The findings
also shows that Charter Hall Long WALE REIT has complied with the IFRS conceptual
framework for financial reporting along with the recognition and measuring of different
financial substances. According to the findings of the second part of the report, it can be seen
that there are certain differences between the sustainability reporting framework of GRI
Reporting and integrated reporting framework of the IIRC. The findings state that Hyprop
Investments Limited has increased efficiency in social and environmental reporting than
Charter Hall Long WALE REIT because of the adoption of integrated reporting framework.

2CONTEMPORARY ACCOUNTING THEORY
Table of Contents
Introduction................................................................................................................................3
Part A.........................................................................................................................................3
Requirement [a]......................................................................................................................3
Requirement [b].....................................................................................................................4
Requirement [c]......................................................................................................................4
Requirement [d].....................................................................................................................5
Answer to i.........................................................................................................................5
Answer to ii........................................................................................................................5
Answer to iii.......................................................................................................................6
Part B..........................................................................................................................................7
Requirement [a]......................................................................................................................7
Requirement [b].....................................................................................................................7
Requirement [c]......................................................................................................................8
Requirement [d].....................................................................................................................9
Requirement [e]....................................................................................................................11
Conclusion................................................................................................................................12
References................................................................................................................................13

3CONTEMPORARY ACCOUNTING THEORY
Introduction
The main aim of this report is the analysis and evaluation of different aspects of
conceptual framework and integrated or sustainability reporting. There are two parts of the
report. First part of the report undertakes the analysis of different aspects of conceptual
framework such as history and development of conceptual framework, concerns regarding
this and others. The second part of the report undertakes the analysis of
integrated/sustainability reporting such as the comparison between these two reporting
framework, strengths and limitations and others. The companies selected for this report are
Charter Hall Long WALE REIT from Australia and Hyprop Investment Limited from South
Africa.
Part A
Requirement [a]
It needs to be mentioned that there is a long history behind the development of
Conceptual Framework for Financial Reporting under the International Accounting Standard
Board (IASB) (Adibah Wan Ismail et al., 2013). In US, the main aim behind the creation of
the 1933 Securitas Act and 1934 Securities Exchange Act was the restoration of the
investors’ confidence after the sudden market crash of 1992 and the following economic
depression in the US. For this reason, the US Securities and Exchange designated the
Financial Accounting Standard Board (FASB) for the development of the conceptual
framework for financial reporting (Zhang & Andrew, 2014). However, the reason is different
in case of UK. It needs to be mentioned that the main reason behind the introduction of the
conceptual framework for financial reporting in UK was the strategy of the country from
moving to principles-based accounting standard from rules-based accounting standards. For
this reason, UK adopted the IFRS based conceptual framework for financial reporting under
the IASB (Palea 2013). In case of Australia, the Australian FRC took the decision for the
adoption of the complete suite of the standards of IASB in June 2012 with the aim to make
harmonization with the global financial reporting standards. For this reason, Australia
adopted the conceptual framework of financial reporting of the IFRS (Brochet, Jagolinzer and
Riedl 2013). It also needs to be mentioned that the main aim of the global companies’ move
towards the adoption of the conceptual framework for financial reporting of IFRS was to
comply with one single standard for financial reporting. It puts the obligation on the
companies to consider the adoption of the conceptual framework of financial reporting under

4CONTEMPORARY ACCOUNTING THEORY
the IASB. Countries that have adopted this conceptual framework are Brazil, Denmark,
Belgium, Bosnia, Australia and many others (Macve 2015).
Requirement [b]
It needs to be mentioned that the Australian accounting profession has expressed
certain concerns regarding the application of the conceptual framework for IASB/IFRS. One
concern is that the adoption of this conceptual framework would create major impact on the
recognition, measurement and disclosure of items in the financial statements of acquiescent
reporting entities and this would lead to economic consequences for their stakeholders.
Another major concern of the accounting professionals is that the adoption of this conceptual
framework would lead to the increased volatility in fair value (Perera & Chand, 2015). The
changes due to the introduction of this conceptual framework would lead to rise in
subsequent lobbying from the affected parties related to the areas like financial instruments
and intangible assets where there is high economic consequences. Another major concern of
the Australian accounting professionals is that the adoption of this new IFRS/IASB
conceptual framework would create impact on the not-for profit entities in Australia (Barth,
2013). It needs to be mentioned that the main focus of the IASB till the date has been the
development of conceptual framework and accounting standards for the large profit-making
companies which are listed companies in the countries. However, the situation is different in
case of Australian since it is the legislative mandate in Australia to develop sector based
accounting standards. For this reason, the adoption of the IASB/IFRs conceptual framework
for financial reporting would also create significant impact on the Australian not-for profit
making companies (Shafii & Zakaria, 2013).
Requirement [c]
It needs to be mentioned that there are certain potential benefits as well as limitations
of the conceptual framework for financial reporting. These benefits creates the wide scope of
the application of this conceptual framework when the limitations are concerns for the
academics’ about the quality of the conceptual framework (Barker & Penman, 2017). Some
of the major benefits of this conceptual framework are facilitation on the discussion of
accounting issues for guiding the standard makers, provide the basics of accounting rationales
and objective, increases the reliability of financial reporting, improves the communication
between accountants and standard-setters and others (Fox et al., 2013). However, the main
concern is the presence of the disadvantages. One limitation is the difficulty involved in
establishing this framework because it is highly expensive for the developing countries and

5CONTEMPORARY ACCOUNTING THEORY
takes huge time. After that, the rigidity of this conceptual framework is another major
concern of the academics. The presence of this rigidness in this conceptual framework makes
it impossible for the introduction of new innovative accounting ideas in the standard. It needs
to be mentioned that the introduction of this new conceptual framework leads to the creation
of conflict with the existing accounting standards that are already in use before the
introduction of this conceptual framework (Lee & Zhong, 2014). Another major concern for
the academics is that the opportunities provided by the new conceptual framework may not
be acceptable or beneficial for all the parties. This limitation reduces the acceptability of this
new conceptual framework for all parties. All these aspects have negative impact on the
quality of the conceptual framework for financial reporting (Disle et al., 2016).
Requirement [d]
Answer to i
It can be seen from the 2018 Annual Report of Charter Hall Long WALE REIT that
the company has prepared four types of financial statements; they are Consolidated Statement
of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Change
in Equity and Consolidated Cash Flow Statement. According to Note D8 (a) of the financial
statements of Charter Hall Long WALE REIT, all the above-mentioned consolidated
financial statements of the company have been prepared in accordance with the IFRS as
issued by the IASB. It implies that the company has prepared all four financial statements as
per the conceptual framework (aasb.gov.au, 2019). It needs to be mentioned that the main
components of these financial statements are income, expenses, profit, asses, liabilities,
equity, cash flows and change in equity (longwalereit.com.au, 2019).
Answer to ii
It can be seen from the 2018 Annual Report of Charter Hall Long WALE REIT that
the company has adopted certain recognition criteria and measurement bases for their assets,
liabilities and revenue; these are shown below:
Revenue – In 2018, the revenue of Charter Hall Long WALE REIT has come from two
sources; they are property rental income and interest income. The company has recognized
their revenue from rental income on straight-line basis (longwalereit.com.au, 2019).
Assets – In the assets, Charter Hall Long WALE REIT has done the recognition of their
investment properties at cost that includes transaction costs. After the recognition process,
these are presented in fair value. After that, the company undertakes the recognition of their

6CONTEMPORARY ACCOUNTING THEORY
derivative financial instruments at fair value on a recurring basis. Lastly, the receivables and
other assets ate recognized at fair value (longwalereit.com.au, 2019).
Liabilities – In case of the payables and other inabilities, the company recognizes them for
the amount that needs to be paid in the future for goods and services received. After that,
Charter Hall Long WALE REIT recognizes the liability related to distribution payable for the
amount of any declared distribution by the company on or before the reporting period. Lastly,
the company recognizes the borrowings at fair value (longwalereit.com.au, 2019).
Answer to iii
There are two fundamental qualitative characteristics which are relevant and faithful
representation; and there are four enhancing qualitative characteristics which are
comparability, verifiability, timelines and understandability. The fundamental qualitative
characteristics can be tested by assessing the faithful representation of the financial elements
that are of most relevant to the users of the financial statements (aasb.gov.au, 2019). To the
users of the financial statements, the most relevant types of information about the financial
elements are their values, measurement criteria, recognition process and others. It can be seen
from the 2018 Annual Report of Charter Hall Long WALE REIT that the company has
disclosed all the above types of information about their assets, liabilities, equity, income and
expenses in the annual report by complying with the necessary standards of AASB, IFRS and
IASB (longwalereit.com.au, 2019).
In case of the enhancing qualitative characteristics, it can be seen that Charter Hall
Long WALE REIT has presented their financial information in such a manner so that this
information can be compared to other companies and the different timeline of the same
company. This indicates towards the presence of comparability characteristic. After that, the
presence of verifiability can be seen because the values in the financial statements can be
verified through the notes to the financial statements (aasb.gov.au, 2019). The presence of
timeliness can be seen as Charter Hall Long WALE REIT provides information on timely
manner. The management of Charter Hall Long WALE REIT has ensured the presence of the
required justification and clarification of their accounting transactions so that the users of the
financial statements can understand them in proper manner (longwalereit.com.au, 2019).

7CONTEMPORARY ACCOUNTING THEORY
Part B
Requirement [a]
It needs to be mentioned that there are certain similarities as well as differences
between the sustainability reporting guidelines of Global reporting Initiative (GRI) and the
International Integrated Reporting Framework of the International Integrated Reporting
Council (IIRC). They are discussed below.
In case of similarity, it needs to be mentioned that the aim of both the sustainability
reporting and integrated reporting is to consider the responsibilities of the business
organizations towards the sustainability related issues. However, it needs to be mentioned
that there are certain differences between these two reporting frameworks. The main aim
behind the creation of integrated reporting is to improve accountability, stewardship and trust
along with harnessing the flow of information and business transparency brought by the
theory. This aims at providing the investors with the information of the company’s
performance in both the financial and non-financial aspects so that they can make better long-
term investment decision about the company (integratedreporting.org, 2019). On the other
hand, integrated reporting framework leads to the development of a report by the companies
about their economic, environmental and social impacts caused by their daily business
activities. A sustainability report is also involved in providing the value as well as
governance model of the firms with the aim to shows the link between their strategies and the
commitments for the development of a sustainable global economy (integratedreporting.org,
2019).
Sustainability reporting framework involves in the communication of the approach of
the companies in effective management of their environmental as well as social issues.
However, integrated reporting framework can be considered as one step further of
sustainability reporting because of its involvement in the effective communication on how the
firms manage the long-term value creation process through the adoption of an integrated
approach of both the traditional risks and sustainability related risks (globalreporting.org,
2019).
Requirement [b]
It needs to be mentioned that there are certain strengths and weaknesses of the
conventional accounting on the basis of sustainability reporting and integrated reporting.
They are discussed below.

8CONTEMPORARY ACCOUNTING THEORY
The conventional accounting under sustainability reporting leads to the increased
understanding of the risks and opportunities through providing major emphasis on the
connection between the financial and non-financial performance of the firms. This type of
accounting assists the managements in the development of long-term strategies and business
plans (globalreporting.org, 2019). The external stakeholders get the opportunity to gain
understanding about the organizational value creation process from both the tangible and
intangible assets. In case of disadvantage, it needs to be mentioned that the accounting
procedures under GRI framework encourages in the organization’s internal performance
reporting and this leads to the risk of promoting the disclosures that misses the organization’s
interactive effects with the external environment. Thus, it could lead to the reporting of
information that can misinform the readers about the company. This needs to be considered
as a major limitation (Adams, 2013).
The conventional accounting based on integrated reporting also has some major
advantages. This leads to the introduction and implementation of more integrated thinking
and management within the companies (iasplus.com, 2019). This accounting system provides
greater clarity on the organizational issues and performance. This conventional accounting
system helps in the improvement of organizational gross margin through highlighting the
financial benefits from the adoption of integrated reporting. Along with the advantages, there
are certain limitations of the integrated reporting based conventional accounting.
Connectivity can be considered as one of the major limitations of this accounting system
since the data collection process needs to be changed after its requirement to break down the
silos. Defining the performance measures is considered as another major limitation under this
conventional accounting. It is very hard for the companies to concise integrated accounting
reports since most of the integrated reports run over 150 pages (James, 2015).
Requirement [c]
Connection of some accounting theories can be seen with the sustainability reporting
practice and integrated reporting practices of the companies. These are discussed below:
Sustainability Reporting – The contents of sustainability framework is related to two
accounting theories; they are legitimacy theory and the stakeholder theory. As per the
legitimacy theory, business organizations voluntarily ensures the disclosure of social and
environmental performance related information with the aim to fulfil their social contracts
that ensues their survival in the society. As per the stakeholder theory, the managements of

9CONTEMPORARY ACCOUNTING THEORY
the companies are needed to take into consideration the needs of all stakeholders. It can be
said based on this theories that the companies make sustainability disclosures in order to
ensure the information need of the stakeholders so that they can ensure their existence in the
society (Fernandez-Feijoo, Romero & Ruiz, 2014).
Integrated Reporting – The contents of integrated reporting is connected with the
stakeholder theory and agency theory. Stakeholder theory states that the needs of all the
stakeholders need to be considered by the managements of the companies. Agency theory
states that the managements of the companies work as agents of the shareholders and thus,
they are responsible for the increase in wealth of the shareholders. On the basis of the above
discussion, it can be said that one main reason for the evolution of integrated reporting is the
increased need of the stakeholders for the communication of sustainability related
information of the companies (García-Sánchez, Rodríguez-Ariza & Frías-Aceituno, 2013).
Requirement [d]
Index of Various Components of Integrated Report
Sl. No. Indexes for Integrated Reporting
1 Responsibility of Integrated Report There should be a statement from
people charged with governance.
2 Strategic focus and future orientation It should include an insight about
the organizational strategies
3 Stakeholder Relationship It should provide insight on the
nature and quality of relationship
of the company with their
stakeholders
(integratedreporting.org, 2019)
4 Materiality It should discus about the matters
that affects the company’s ability
to create value
5 Conciseness It should be concise
6 Reliability and Completeness It includes both the positive and
negative matters in a balanced
manner
7 Organizational Overview and External It should contain what does the

10CONTEMPORARY ACCOUNTING THEORY
environment organization do and under which
circumstance it operates
8 Governance It should have the information on
the company’s governance
structure
9 Business model It should contain what is the
company’s business model
(integratedreporting.org, 2019)
10 Risk and Opportunities It should contain the risk and
opportunity of the company that
affect the value creation ability of
the firm
11 Performance It should include whether the
company has been able in
achieving its strategic objectives
and performance
(integratedreporting.org, 2019)
12 Outlook It should mention the challenges
faced by the company to achieve
the strategy
13 Basis of preparation and presentation It should include the basis on
which the company has determined
which matters need to be included
in the report
(integratedreporting.org, 2019)
(Source: integratedreporting.org, 2019)
It needs to be mentioned that Hyprop Investments Limited have prepared and
presented their Integrated Report for the year 2018 while complying with the above
mentioned indexes or checklist. While complying with the first index, Hyprop Investment
Limited has provided the statement of Leadership Review from the Chairman Gavin Tipper,
the chairman and Pieter Prinsloo, the Chief Executive Officer (hyprop.co.za, 2019). As per
the second index, the company has provided their strategies which include shopping centre

11CONTEMPORARY ACCOUNTING THEORY
related strategies and key business drivers. After that, Hyprop Investment Limited has
included their engagement strategies with the stakeholders under the section ‘Stakeholder
engagement’ when they have provided their approach, key aims and dispute resolution.
Under the risk management framework, the key material issues are provided such as low rate
of GDP, slow consumer spending and others (hyprop.co.za, 2019). The company has
provided the details of the market in which they operate that is South Africa, South-Eastern
Europe and others. Under the disclosure of governance, Hyprop Investment Limited has
provided information on remuneration report and corporate governance. The company has
also provided the information on their business model that includes the six capital of
integrated reporting. Risks and opportunities of the business of Hyprop Investment Limited
can be seen under the section of ‘Risk and opportunity management’ (hyprop.co.za, 2019).
Both the financial and non-financial performance of the company can be seen in this
integrated annual report.
Requirement [e]
When comparing the reporting practice of Charter Hall Long WALE REIT against the
above-mentioned index of integrated reporting, it can be seen that the report contains a
declaration from the chairman and the fund manager (longwalereit.com.au, 2019). The report
also contains the company’s strategic objectives, but there is less information in the aspect of
strategic objective. However, it needs to be mentioned that there is sufficient information in
the Annual Report of Charter Hall Long WALE REIT on the governance related aspects like
executive remuneration and corporate governance. At the same time, there is not any
information on the business model of the company. The company has only provided
information of financial risks, but information on other business risks and opportunities is not
there in the 2018 Annual Report of the company. Charter Hall Long WALE REIT has
provided information on their performance and basis of preparation of the financial
statements (longwalereit.com.au, 2019).
When comparing the financial reporting of Charter Hall Long WALE REIT with the
integrated reporting of Hyprop Investments Limited, it can be observed that Charter Hall
Long WALE REIT has lack of efficiency in their reporting in considering the necessary
financial and non-financial aspects of their reporting due to not adopting the integrated
reporting approach. Through the adoption of the approach of integrated reporting, Hyprop
Investments Limited has been able in reporting in all the indexes of integrated reporting in a
single report whereas Charter Hall Long WALE REIT is needed to issues different reports

12CONTEMPORARY ACCOUNTING THEORY
like sustainability report and governance report for providing all information on their
financial and non-financial reporting. In this manner, it is not possible for the management of
Charter Hall Long WALE REIT to provide their stakeholders with both the financial and
non-financial information through one single report. However, Hyprop Investments Limited
has shown their efficiency in reporting all these aspects through one single report
(hyprop.co.za, 2019).
Conclusion
The above discussion states that the main reason for the countries like UK, Australia
and others to adopt the conceptual framework for financial reporting of IFRS under the IASB
was to ensure harmonization with a single accounting standard. It can also be seen from the
above discussion that Charter Hall Long WALE REIT has complied with different aspects of
the conceptual framework for financial reporting for the preparation and presentation of their
financial statements. The above discussion undertakes the comparison between the
sustainability reporting framework and integrated reporting. It can be seen from the above
that Hyprop Investments Limited has more efficiency than Charter Hall Long WALE REIT
in the reporting of their financial and non-financial information for the purpose of value
creation.

13CONTEMPORARY ACCOUNTING THEORY
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14CONTEMPORARY ACCOUNTING THEORY
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