Aspects of Corporate External Reporting

This report discusses the concerns and applicability of contemporary accounting in corporate external reporting. It covers the conceptual framework, literature review, strengths, limitations, and practical applicability of sustainability reporting. The report also includes a comparison between the GRI and IIRC frameworks and a checklist for a South African company.

Running head: CONTEMPORARY ACCOUNTING THEORY
1
Aspects of corporate external reporting
Students name
Name of the university
Authors note

CONTEMPORARY ACCOUTING THEORY 2
Executive summary
The scope of this report will include concerns regarding contemporary accounting as
provided for under the different guidelines and regulations of the International Accounting
Standards Board (IASB). It is presented in two main sections with section A majorly discussing
the various principles regarding the conceptual framework of accounting. This will include a
look at the literature review of the contemporary accounting in countries such as the US, UK,
and Australia respectively. Imitations and strengths concerning the framework are as well
covered within the first section. To wind up with the first section, the Australian professions
concerns together with the concerns of the academic are covered. Section two, on the other
hand, covers the practical applicability of the sustainability reporting as required by the IIRC and
GRI frameworks of accounting. This as well involves an assessment of the usefulness of the
frameworks and their strengths and limitations. A checklist of the South African company
regarding the disclosure requirements as compared to the Australian company is provided. The
second section of the report is concluded with the additions that the Australian Company
should include so as to ensure sustainable reporting as required by the GRI and IRC frameworks
of accounting.
Introduction
A continuation of the report is provided with more elaborate explanations of the
concepts. Key definitions of important aspects are availed in the main discussion of the
report. The important guidelines and regulations of contemporary accounting are
further presented in the general discussion. The theoretical aspect of contemporary
accounting and its strengths and limitations will certainly be the points of focus. The

CONTEMPORARY ACCOUTING THEORY 3
academic and professions concerns will, therefore, be part of the discussion in part A of
the report.
A). Review of the conceptual framework literature in the US, UK and Australia
respectively
The main aim for the introduction of the conceptual framework was to assist
accounting professions when preparing financial reports. Since the framework is not an
accounting standard on its own, it is a combination of the different accounting principles
and guidelines. These guidelines are well stated under the US GAAP. These include
guidelines under the IFRSs and the IASB which required for financial statements to
reflect characteristics such understandability among others (Adams,2013). The GAAP
however first became applicable when the US experienced the collapse of the stock
market in 1929. The collapse of the stack meant that the public together with the
investors would lose confidence and trust in the financial market (Adams, 2013). To
change such a situation, the Securities Exchange Commission of the United States
decided to formulate the Generally Accepted Accounting Principles, (GAAPs).these were
aimed at restoring confidence through guidelines that called for transparent accounting.
On the other hand, however, the need to cope with other countries in Europe and other
regions was a major drive for the UK to devise a way through which accounting
standards would emphasize (Amato and White,2013). That is why the UK came up with
what is known as the UK GAAPS. These principles had the major aim of ensuring similar
or related standards to those that other countries applied in the presentation of

CONTEMPORARY ACCOUTING THEORY 4
financial statements. It is worth noting that the UK GAAP are mainly operative in the UK
and the Republic of Ireland. Unlike the other countries, Australia initially had a sound
and operative national accounting system. However, with the introduction of the IFRSs,
the AASB found it useful and important to take into consideration the requirements of
these international standards.
B). Professions concerns about the conceptual framework
The improvement of the conceptual framework of accounting has left many
professions in Australia uncertain about two main issues. The very first concern that the
framework leads to is the issue a proper and clear definition of what an entity stands for
(AASB,2015). The framework is found to be having a rather different meaning of an entity in
terms of definition as compared to that of the Australian Accounting Board (AASB,2018). This
diversity in concepts and explanation negatively impacts on the guidelines such as
understandability and relevance. It does not show any relevance if two accounting boards
define the same principle differently and yet they work hand in hand with each other
(AASB,2013).
The second concern that the Australian professions raise against the framework is the
issue regarding the reporting guidelines. In Australia, the companies are at liberty to prepare
the type of reports that they prefer. However, the new form of the framework has
consequently led to a number of impacts (Barker and Teixiera, 2018). For example, the
conceptual framework means that two similar companies running the same type of business
can end up preparing different financial reports (Bradford et al, 2017). One company would

CONTEMPORARY ACCOUTING THEORY 5
prepare general purpose accounting reports whereas the other can end up preparing special
purpose accounting reports. This, however, is found to be having no criteria and it is raising a
lot more concerns regarding transparency and understandability to the public. The framework
does not specify the particular company to which the new guidelines and standards apply and
this has consequently resulted in numerous challenges for the accounting professions in
Australia.
C) Academic concerns
Apart from the profession's point of concern about the limitations of the conceptual
framework, the academic group of individuals has as well identified a number of concerns as
well. These concerns are therefore explained below and they include both the benefits and
limitations as explained below.
One of the major benefits of using the conceptual framework of accounting is that it
promotes an objective and more transparent representation of affairs (Christensen,2011). As
the reports are prepared basing on qualitative guidelines such as faithful representation and
relevance, it is of great benefit to both the organization and the end user of information
(D’aquilla,2018). The failure to apply such guidelines and standards would imply that the
reports prepared are rather not correct or simply they do not provide a true and fair image.
Consequently, the framework plays a significant role in ensuring uniformity and value
determination.
One of the limitations of the framework, however, lies in the fact that the system
majorly focuses on financial information as the only determinant of organizational value

CONTEMPORARY ACCOUTING THEORY 6
(Demirel and Erol, 2016). In the current trend of reporting, an organization’s value is not only
determined by financial reports alone. Other types of capital and factors have been emerging
over the years and this has rendered the framework ineffective. Such factors include social
concerns, environmental concerns and so many others.
Application of the conceptual framework by Bellamy’s Company
D) As per the conceptual framework, Bellamy’s company prepared five financial
statements in its 2018 annual report. These included the balance sheet, the statement of
comprehensive income, the cash flow statement, the notes to the accounts report and the
statement of changes in equity. The major components of these reports include the assets,
liabilities among others and these are mainly in the balance sheet. The cash inflows and
outflows are reflected in the cash flow statement and these are in the form of payments and
receipts. The consolidated income statement, on the other hand, reflects items such as incomes
and expenditures of the company.
For the purpose of recognition, the Company recognizes loans and other liabilities at
their fair value less the net costs of the transaction. The borrowings of the company are off-set
through the amortization procedure at their net cost over the lifetime. If any differences are
realized between the net cost and the proceeds, the redemption amount is recognized as an
income in the income statement over the lifetime of the loan. This is done with the use of the
effective interest method. The fees paid when acquiring the loans are capitalized and amortized
using the straight-line basis over the term of the facility (Global Reporting Initiative, 2017).

CONTEMPORARY ACCOUTING THEORY 7
The trade receivables as part of the revenues are recorded at their initial fair value and
they are also amortized over their cost minus any provisions for bad and doubtful debts. The
sales made to export distributors are receivable before shipments are made and secured by
letters of credit. Those sales made to the domestic customers or debtors are however
receivables within a period of 45 days(Distell,2018).
Assets such as the inventories are recorded at the lower of between the lower of the
cost and the net realizable value (Bellamy’s, 2018). The intangible assets are annually checked
for impairment and the value of goodwill on purchase of subsidiaries is included in the
intangible assets. For tangible assets such as the property, plant and equipment, the value is
recorded at cost o the fair value less any accumulated depreciation or amortization (Kilic et
al,2017).
Part B.
Comparisons between the GRI sustainability reporting guidelines and the IIRC
frameworks
The GRI framework is mostly aimed at providing businesses with guidelines that should
be followed when preparing integrated reports for a wider view of the organizational position
and performance (Global Reporting Initiative,2017). This is done for purposes of ensuring
sustainability (D’aquila,2018). The GRI framework requires aspects such as the multi-
stakeholder input, governmental activities and others. The IIRC council, on the other hand,
offers similar guidelines but however on the perspective capital. Unlike the GRI that looks at
these as factors of sustainability, the IIRC framework considers such as aspects as other forms

CONTEMPORARY ACCOUTING THEORY 8
of capital. The IIRC stresses the need for environmental capital, human capital, and social
capital and so on (GRI 101: foundation, 2016).
B). Conventional accounting: strengths and weaknesses.
The conventional approach of accounting follows particular guidelines and these are
required to be applied when preparing financial statements. Recognition criteria for items such
as those relating to revenues, assets, and liabilities among others. Therefore the conventional
accounting approach provides a harmonized and uniform method for recognizing all
transactions. The uniformity among various reports enhances comparability between different
entities (Australian Accounting Standards Board,2018). This is beneficial to people such as
stakeholders who would intend to invest and allocate their capital (Dillard,2014).
The limitation with the conventional accounting system, however, comes from the
limited scope of coverage and numerous assumptions. The conventional framework particularly
considers the financial capital as the only determinant of value. However, with the current
trend in accounting and value determination, an organization is no longer determined to base
on financial value alone (Killic et al, 2017). Other forms of capital are required to be disclosed
when valuing an organizational value. Therefore other forms of capital such as human,
environmental, social among other types of capital are very important when determining the
value of an organization (Australian Accounting Standards Board, 2013).
The applicability of the theGRI and IIRC theories

CONTEMPORARY ACCOUTING THEORY 9
The theories have been identified to be of great importance to the curerent
reuquirements of preparing reports especially the integrated reports for organizations. Due to
there wide coverage, they have significantly influenced sustainsable reporting for companies.
This has majorly been though the recognition of other types of capital such as the human
capital, environmental capital, social and other types of capital. This has been a major strength
innterms of sustainable reporting as they cover a variety of stakeholder interests (Australian
Accounting Standards Board,2015).
On the other hand, the weakness that these theories are associated with is the failure to
address the the aspect of preciseness. Mas they integrate a wide range of apects, they tend to
be very long in nature and this cconsequently limits the level of relevance and
understandability. Stake holders who do not have prior knowledge about the guidelines of
preparing such statements may often find it difficult to interprete such statements.
A checklist for the South African company
item Description

CONTEMPORARY ACCOUTING THEORY 10
sustainability
The Distell
company prepares the
sustainability report in the
annual report of 2018.
This is among the
requirements of the GRI
framework. For example,
Distell Company
established a
sustainability council. The
main objective of the
council is to provide
strategic directions to the
company.
human capital The human capital
is as well recognized in
the annual reports of the
company. For example,
there is a provision for
employment equity
within the integrated
reports. The company set

CONTEMPORARY ACCOUTING THEORY 11
a five-year target ending
in Jun 2022. This plan
includes actions to be
undertaken regarding
employee welfare.
consumer and health
safety
The company aims
at promoting no incidents
relating to quality. This
means that the company
puts customer priorities
as a way of ensuring
sustainability as well as
satisfying the wide
stakeholder requirements
and demands. In the long
run, if customers' desires
and demands are fully
satisfied, there is high
compliance with social
responsibility.

CONTEMPORARY ACCOUTING THEORY 12
environmental capital
Due to the
environmental changes in
the cape town region, the
company shows that
there was a contingency
plan to cater to the
unfavourable climatic
conditions. This plan was
to ensure continuity
during the long and short-
term period. This plan
was simply a move to
ensure the sustainability
of the company. This plan
involved processes such
as water recycling so as to
keep business activities
operational.

CONTEMPORARY ACCOUTING THEORY 13
shareholder disclosure
The annual reports
of the company reflect
the current value of the
firm. This is presented
alongside the previous
performance on the stock
market. For example,
during the 2018 financial
year, the per share value
of the company was
recorded to be 15,000
cents which reflects a
decline from 17,261 in
2017 (Distell, 2018).

CONTEMPORARY ACCOUTING THEORY 14
Whether the Australian company presented an integrated report
Depending on the comparison between the two companies, it is evident that the
Australian company did not prepare an integrated report. Therefore if the company intends to
have an integrated report, it should include the following items. They include disclosures about
human capital, environmental disclosures, and social responsibility reports among others.
Conclusion
Therefore, for better sustainable reporting companies should reconsider and adopt
the integrated reports. This is because the current environmental demands require a lot more
disclosures in a broader perspective. The conventional accounting does not provide for such
disclosures and this limits the value of an origination.

CONTEMPORARY ACCOUTING THEORY 15
References
Adams. C.,( 2013). Integrated Reporting and the Six Capitals: What Does It All Mean? Retrieved
from https://drcaroladams.net/integrated-reporting-and-the-six-capitals-what-does-it-
all-mean/
Amato. N., White. S., (2013). IIRC Releases International Integrated Reporting Framework. Retrieved
from https://www.journalofaccountancy.com/news/2013/dec/20139207.html
Australian Accounting Standards Board,( 2013). Amendments to Australian Accounting
Standards – Conceptual Framework, Materiality, and Financial Instruments. Retrieved
from https://www.legislation.gov.au/Details/F2014L00370/Explanatory%20Statement/
Text
Australian Accounting Standards Board,(2015). Conceptual Framework for Financial Reporting.
Retrieved from https://www.aasb.gov.au/admin/file/content105/c9/ACCED264_06-
15.pdf
Australian Accounting Standards Board,(2018). Consultation Paper: Applying The IASB’s Revised
Conceptual Framework And Solving The Reporting Entity And Special Purpose Financial
Statement Problems. Retrieved from
https://www.aasb.gov.au/admin/file/content105/c9/ITC39_05_18_1525940517548.pdf
Barker. R., Teixeira. A., (2018). Gaps in The IFRS Conceptual Framework. Retrieved from
doi/pdf/10.1080/17449480.2018.147677.

CONTEMPORARY ACCOUTING THEORY 16
Bellamy’s, (2018). Bellamy's annual report.retrieved from
https://investors.bellamysorganic.com.au/FormBuilder/_Resource/_module/
hwGxZyb3NkyBtC5tw1kqzQ/docs/reports/Bellamys_Annual_Report_2018.pdf
Bradford. M., Earp. B. J., Williams. P.F.,(2017). Understanding Sustainability for Socially Responsible
Investing and Reporting. Retrieved from
https://www.emeraldinsight.com/doi/full/10.1108/JCMS-10-2017-005
Christensen. J., (2011). Conceptual Frameworks of Accounting from an Information Perspective.
Retrieved from https://doi.org/10.1080/00014788.2010.9663403
D’aquila., J., (2018). The Currents State of Sustainability Reporting; the CPA Journal. Retrieved from
https://www.cpajournal.com/2018/07/30/the-current-state-of-sustainability-reporting/
Demirel. B., Erol. I., (2016). Investigation F Integrated Reporting As A New Approach Of
Corporate Reporting. Retrieved from
https://thejournalofbusiness.org/index.php/site/article/download/1002/634
Dillard. J., (2014). Accountability, Social Responsibility, and Sustainability: Accounting For Society And
The Environment. Retrieved from https://www.emeraldinsight.com/doi/full/10.1108/SAMPJ-04-
2015-0021
Distell, (2018). Distell integrated annual report. Retrieved from
https://www.distell.co.za/knowledge/pkdownloaddocument.aspx?docid=1219
Global Reporting Initiative, (2017). GRI Works With IIRC And Leading Companies To Eliminate
Confusion. Retrieved from https://www.globalreporting.org/information/news-and-

CONTEMPORARY ACCOUTING THEORY 17
press-center/Pages/GRI-works-with-IIRC-and-leading-companies-to-eliminate-reporting-
confusion.aspx
GRI 101: Foundation, (2016). Consolidated Set Of GRI Sustainability Reporting Standards 2016. Retrieved
from http://www.ekvilib.org/wp-content/uploads/2018/03/GRI-standardi-2016.pdf
Kilic. M, Kuzey. C., Arthur. J.,(2017). Assessing The Current Company Reports According To The
IIRC Integrated Reporting Framework. Retrieved from
https://www.emeraldinsight.com/doi/full/10.1108/MEDAR-04-2017-0138