Contemporary Accounting Theory

This report explores the concepts of contemporary accounting theory, focusing on the conceptual framework for financial reporting and issues related to sustainability and integrated reporting. It discusses the adoption and implementation of the conceptual framework, concerns raised by accounting professionals, and the qualitative characteristics of financial information. It also examines sustainability reporting under GRI and integrated reporting under IIRC, highlighting their differences and advantages. The report includes a case study of Ooh Media Limited and Mesoblast Limited.

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

1CONTEMPORARY ACCOUNTING THEORY
Table of Contents
Executive Summary:..................................................................................................................2
Introduction:...............................................................................................................................3
Part A: Conceptual framework...................................................................................................3
Requirement (a):.....................................................................................................................3
Requirement (b):....................................................................................................................4
Requirement (c):.....................................................................................................................5
Requirement (d):....................................................................................................................6
Question i:..........................................................................................................................6
Question ii:.........................................................................................................................7
Question iii:........................................................................................................................8
Part B: Integrated/sustainability reporting.................................................................................8
Requirement (a):.....................................................................................................................8
Requirement (b):....................................................................................................................9
Requirement (c):...................................................................................................................10
Requirement (d):..................................................................................................................11
References:...............................................................................................................................15

2CONTEMPORARY ACCOUNTING THEORY
Executive Summary:
The report mainly intends to shed lights on important areas related to different areas
of conceptual framework drawing reference to sustainability reporting, integrated report and
financial reporting in the field of corporate social reporting. The findings have suggested that
different countries have adapted conceptual framework for the purpose of financial reporting
in order to follow guidelines from an identical financial reporting system. In addition to
discussing adaption of conceptual framework for financial reporting, the paper also addresses
different concerns raised by Australian professionals related to newly implement conceptual
framework. As claimed by these professional the new framework likely to have some adverse
consequence on financial reporting. The present report has given special attention on
different reporting practices related to financial and non-financial aspects related to an
Australian company named Ooh Media Limited and a South African company named
Mesoblast Limited.
In connection to different findings of the report, various similarities and differences
between sustainable reporting under the guidelines of GRI and that of integrated reporting
under the framework of IIRC needs to be discussed. Financial reporting under traditional
accounting is different from integrated and sustainability reporting in the sense that the
traditional system ignores importance of information related to areas other than financial
reporting of a business while the two other incorporate this. It is necessary for any
organization to consider all the aspect of corporate social reporting to maintain balance in
areas related to both financial and non-financial aspects.

3CONTEMPORARY ACCOUNTING THEORY
Introduction:
In order to accomplish objectives of the report, the discussion has been divided into
two parts. The first part focuses on conceptual framework designed for financial reporting
while the latter part discusses issues related to sustainability and integrated reporting. The
two parts critically discuss various aspects related to two chosen topics. In the first segment,
the conceptual framework that follows the guidelines of IASB has been evaluated critically.
The second segments mainly evaluate various aspects in reference to both sustainability and
integrated reporting. Finally, the report selects Ooh Media Limited and Mesoblast Limited in
order to meet other purpose of the present report.
Part A: Conceptual framework
Requirement (a):
Drawing inference from various literature related to the historical development of
conceptual framework for reporting information related to financial aspects, IASB has come
to the conclusion that there is a uniform factor that encourages adaption of the conceptual
framework to different entities spread globally (Flower, 2018)As these entities aim to follow
an identical framework for financial reporting, a uniform accounting standard has been
developed. In addition to this uniform factor, there are historical evidences supporting
development of conceptual framework by different nations like Australia, UK, USA and
others. Australia focuses to keep its financial reporting standard balanced with the
international standard as designed by IASB. With the objective of accomplishing this goal,
Australia adapted conceptual framework that is based on one uniform set of principles related
to accounting standard for documenting financial details (Henderson et al., 2015). The
economy of US experienced a severe downturn in 1932 which necessitated implementation of

4CONTEMPORARY ACCOUNTING THEORY
a single accounting standard so that it could cover all the necessary aspects related to both
economic areas and that of the system of financial reporting. This was the time when US
went for a conceptual framework receiving assistance from FASB and Securities and
Exchange Commission of United State. Before the adoption of conceptual framework, UK
mainly followed an accounting standard that was rule-based (Herremans, Nazari &
Mahmoudian, 2016). Realizing different drawbacks of the previous rule-based standard, UK
shifted towards the conceptual framework developed by IASB.
Requirement (b):
The accounting professionals in Australia have stated their concern in relation to newly
incorporated conceptual framework. These concerns have been raised on some valid ground
as discussed in the subsequent section.
Firstly, the accounting professionals have raised their doubts regarding the process of
realization and assessments of assets and liabilities of an organisation. They have claimed
that the concerned entity has to carry negative bearings resulted from the process of
measuring and realising assets, liabilities, income and other financial aspects (Pinnock et al.,
2017). Different stakeholders such as investors, shareholders and other are vulnerable to such
negative outcomes.
Secondly, the group of accounting professionals highlighted the aspect that adoption
and implementation of conceptual framework as following the uniform accounting standard
of IASB have limited or no impact on not-for-profit business entities. This is due to variations
in both valuation and recognition process of different economic and financial components
(Yong, Lim & Tan, 2016) It has been stated that the IASB’s conceptual framework has
mainly been designed for listed entities aiming to maximise profit. It is suggested that

5CONTEMPORARY ACCOUNTING THEORY
Australia legally need separate accounting standard for various sectors of the economy. This
has raised a serious concern for non-for profit organization.
Another drawback of the conceptual framework is the growing uncertainty in
computation of fair value of different financial components like assets, liabilities and others.
The accounting professionals have considered this as a significant cause of concern (Gornik-
Tomaszewski & Choi, 2016). There is also possibility of lobbying by stakeholders that are
adversely affected by the design of new conceptual framework in areas related to value
assessment of different intangible assets with the use of fair value and such others.
Requirement (c):
The conceptual framework as developed by IASB has the primary advantage in the
areas of integrating financial reporting system of different legal entities operating
internationally. Considerable amount of researches have been conducted to evaluate various
aspects related to conceptual framework to report financial details (Allee et al., 2015). These
researches have revealed some aspects that could adversely affect the quality of conceptual
framework and could be regarded as serious shortcomings of the system. The subsequent
section has discussed these issues.
In the first place, adoption and implementation of IASB’s conceptual framework leads
to a conflict between new standard and that of the existing standard. In the presence of such
conflicts, the accounting standard becomes a critical issue raising question on quality of the
conceptual framework that has been initiated for reporting financial details (Barker, 2015).
 It is necessary to consider the major rigidity in the IASB conceptual framework as
another demerit having effect on the quality of new standards. With such rigidity in
place, it is not possible for the standard setters to develop new standards or accounting

6CONTEMPORARY ACCOUNTING THEORY
ideas within the conceptual framework (Adams, 2017). The aspect is observed to be
enhancing the quality of conceptual framework when it comes to financial reporting.
 It is crucial to mention another aspect regarding the introduction and implementation
process is an expensive one, since it consumes huge amount of time. This is deemed
to be a negative factor for the quality of conceptual framework, since incorrect
implementation could adversely impact the financial reporting process (Brown &
Dillard, 2014).
 All stakeholders or parties could not accept fully the conceptual framework. In the
presence of such aspect, it is not possible to gain the full benefits of the IASB
conceptual framework and thus, it is a major factor with adverse impact on the quality
of conceptual framework (Cheng et al., 2014).
Requirement (d):
Question i:
Based on the 2018 annual report of Ooh Media Limited, various financial statements
have been disclosed in the same that mainly include the following:
 Income statement
 Other comprehensive statement of income
 Balance sheet statement
 Statement of changes in equity
 Statement of cash flow
It could be identified from the financial footnotes of the organisation that it has made
compliance with the accounting standards of Australia, IFRS and IASB based on which the
financial statements are prepared and presented accordingly (Member.afraccess.com, 2019).

7CONTEMPORARY ACCOUNTING THEORY
There are various elements included in the financial statements such as income, expenses,
liabilities, equity and assets.
Question ii:
The following explanation is provided for representing the recognition of liabilities,
revenue and assets of Ooh Media Limited:
Liabilities:
Different types of liabilities could be found from the annual report of Ooh Media
Limited. For payables, amortised costs are used for recognition and there is absence of any
discount because of short-term nature. In addition, the use of fair value is made for disclosure
of interest-bearing liabilities after the subtraction of directly attributable transaction costs
(Member.afraccess.com, 2019).
Revenue:
It could be seen from the financial footnote of the organisation that it has recognised
revenue based on the probability of enjoying future benefits and it is possible to measure the
same reliably. The contract terms are used as the base for recognition of revenue and it
assures accrual accounting for measuring the same. Along with this, Ooh Media Limited is
involved in revenue recognition from selling products when risks and rewards are passed
over to the purchasers adequately (Member.afraccess.com, 2019).
Assets:
As per the latest annual report of Ooh Media Limited, there are different classes of
assets for the organisation. In case of freehold land and buildings, cost basis is used for
representing them after adequate subtraction of accumulated impairment losses and
accumulated depreciation. After this, the organisation has represented its listed and unlisted

8CONTEMPORARY ACCOUNTING THEORY
investments as assets and fair value is used for their recognition in the income statement.
Finally, there is use of net realisable value or cost in order to conduct inventory measurement,
whichever is minimal (Member.afraccess.com, 2019).
Question iii:
One notable fact that could be observed is the five qualitative characteristics of
financial information comprising of relevance, comparability, faithful representation,
timeliness and verifiability (Churet & Eccles, 2014). Based on the latest annual report of Ooh
Media Limited, the information related to assets, income, equity, liabilities and expenses have
been presented adequately where evidence is found about conformance to the necessary
accounting guidelines, which ensures the features of relevance and faithful representation (De
Villiers, Rinaldi & Unerman, 2014). In order to assure verifiability and understandability,
notes to financial statements have been prepared by Ooh Media Limited in its annual report
followed by disclosures within the scheduled time and release of financial information.
Lastly, in order to ensure the presence of comparability feature, the latest financial
information contains data of two years to facilitate comparison.
Part B: Integrated/sustainability reporting
Requirement (a):
For reporting corporate social responsibility, it has been found that sustainability
reporting under GRI and integrated reporting under IIRC have gained immense significance
and it is necessary to disclose financial information of the firms as well. On the other hand, it
is noteworthy to mention that the structures of corporate social responsibility have key
differences, which are analysed as follows:

9CONTEMPORARY ACCOUNTING THEORY
Sustainability reporting is a technique of communicating the measures undertaken by
a firm to handle considerable societal and environmental issues with adequacy. The
framework is involved in providing details about public communication of the undertaken
processes and policies of the firms in analysing societal and environmental issues significant
to them, which are considered in the form of material issues (Sustainability Reporting,
2019). This framework is involved in providing disclosures about the ways by which issues
are addressed by the entities and their performance compared to the issues. The framework is
formulated by conforming to the rules that are mentioned in GRI (Flower, 2015).
An additional step beyond sustainability reporting is identified as integrated reporting,
as it ensures communication about the efficacy of a firm to handle long-term value by
adopting an integrated method towards traditional risks and sustainability (Integrated
Reporting, 2019). The main goal of the framework includes the way of integrating social and
environmental thinking into the business operations rather than disclosing distinct
presentation of financial performance and sustainability. The framework takes into account
the concept of six capital in terms of sustainability reporting that comprise of manufacturing,
social, natural, intellectual and relationship so that the vast social and environmental issues
could be addressed effectively (Frias‐Aceituno, Rodríguez‐Ariza & Garcia‐Sánchez, 2014).
Requirement (b):
There are a number of advantages and disadvantages in compliance with
sustainability reporting. The rising description of risk and opportunities from consideration of
financial and non-financial aspects could be adjudged as a major advantage of the system of
conventional accounting. With the assistance of the system within sustainability reporting,
the stakeholders could have an insight of the strategies of the firms to take into account the
business influences. However, the external stakeholders could be mis-leaded because of main

10CONTEMPORARY ACCOUNTING THEORY
dependence put on reporting internal information of the entity (Higgins, Stubbs & Love,
2014).
On the other hand, conventional accounting is involved in inserting integrated
thinking in the overall system of accounting leading to clarity and transparency on issues and
performance of the firm. Therefore, there would be increased level of profit for the business,
as it provides information on both financial and non-financial performance (Kerr, Rouse &
De Villiers, 2015).
Requirement (c):
Different theories are possible to be applied on sustainability reporting as well as on
integrated reporting that are provided as follows:
Sustainability reporting:
Sustainability reporting is observed to bear resemblance with legitimacy theory as
well as stakeholder theory. Based on the concept of legitimacy theory, it is mandatory for the
firms to disclose both environmental and societal performance necessary for maintenance of
sustainability within the society. As per the stakeholder theory, it is crucial to maintain
identical stakeholder interest, instead of concentrating only on the stakeholders. By taking
into account the two theoretical perspectives, the firms disclose financial as well as non-
financial information to the various stakeholders for assuring legitimate social survival.
Hence, it is crucial from the viewpoint of the business (Lodhia, 2015).
Integrated reporting:
The theories that are applicable for integrated reporting constitute of stakeholder
theory and agency theory. According to the agency theory, the management conducts
activities as agents for the shareholders and it is liable to maximise the overall wealth of the

11CONTEMPORARY ACCOUNTING THEORY
shareholders. By combining the two theories, integrated reporting is designed to meet the
varying requirements of the stakeholders in order to provide information on performance
related to sustainability of the firms (Pinnock et al., 2017).
Requirement (d):
Number Indices Summary
1 Integrated reporting responsibility Personal opinion associated with
governance
2 Strategic focus as well as future
orientation
Information related to business
strategy
3 Stakeholder relationship Information related to stakeholder
relationship and engagement
4 Materiality Information related to materiality
issue
5 Business overview along with
external environment
Business operations along with other
operational areas related with the
business
6 Governance Information associated with
structure of governance
7 Business model Information concerned with business
model
8 Opportunities and risks Opportunity and risk focussed on

12CONTEMPORARY ACCOUNTING THEORY
value creation
9 Performance Information that are financial and
non-financial
10 Preparation and presentation Determination aspects regarding
matters included in the report
Table 1: Index of Integrated Reporting
(Source: Integrated Reporting, 2019)
Explanation on Mesoblast Limited
It has been revealed that Mesoblast Limited has offered its integrated business report
for 2018 through abiding by IIRC. This integrated report includes individual’s responsibility
statement taking consideration for governance such as Finance Director, Chairperson and the
company’s Chief Executive Officer (Mesoblast.com, 2019). Moreover, the company has also
offered elaborated information on its business practices in the strategy section within the
integrated report. Following such strategy, Mesoblast Limited considered developing its
relation with stakeholders with increased help of involvement platforms. Moreover, certain
material based concerns might be attained by the company concerning the ways by which
these issues are selected and related capital and stakeholders (Serafeim, 2015).
The company has considered disclosure of its business model including its vital
partnerships and resources, strategic trend impacting business model, high material risks,
value chain and impact on capitals. In addition, elaborated evaluation of business
opportunities and risks was provided by the company in its integrated report encompassing

13CONTEMPORARY ACCOUNTING THEORY
the chances of risks along with overall company exposure toads such risks. Moreover, region-
based reporting conducted by Mesoblast Limited is compared with its strategic targets
(Stubbs & Higgins, 2014). For this reason, it can also be stated that the company provided all
the needed information as per the index.
Requirement (e):
From the “Sustainability” and “Investors” sections of Ooh Media Limited, it was not
revealed that the company develops integrated report. In addition the company do not
develop any separate report concerned with their disclosures on corporate social
responsibility. Rather, it has a “sustainability” section within its annual report within which
information was offered by the organisation concerned with its sustainability and CSR
initiatives (Kerr, Rouse & De Villiers, 2015). Through analysing Ooh Media Limited’s
annual report for 2018 it can be observed that the company offered just few sections on its
sustainability reporting and most of the sections were regarding users’ financial information
(Sustainability Reporting, 2019). Through comparing its CSR reporting with the index
indicated above it is gathered that there is certain vital information. Few important areas
encompass stakeholder involvement, risk management, business strategy, material issues and
a few more. Conversely, after comparing with Mesoblast Limited it can be signified that the
CSR of the company is better than Ooh Media Limited. This is for the reason that the
company considered implementing reporting framework within the company. An increased
attention has been placed on developing financial disclosures by Ooh Media Limited within
the annual report (Lodhia, 2015). In contrast, a suitable balance is sustained by Mesoblast
Limited through disclosing its non-financial as well as financial data necessary for ensuing
effective corporate and financial reporting.
Conclusion:

14CONTEMPORARY ACCOUNTING THEORY
From completion of the report it has been gathered that an increased advantage has
been attained from the IASB conceptual framework as there is existence of only accounting
standards group for global companies that serves as a vital part in ensuring effective financial
reporting. Ooh Media Limited is observed to abide by IFRS and Australian Accounting
Standards and also considered that IASB is followed in preparation of all its financial
statements. Mesoblast Limited has represented its integrated corporate report in 2018 through
abiding by IIRC regulations. This integrated report includes individuals responsibility
statement that looks after governance such as Finance Director, Chairperson and the
company’s Chief Executive Officer. An increased attention has been placed on developing
financial disclosures by Ooh Media Limited within the annual report. Moreover, it has also
been gathered that Mesoblast Limited’s CSR reporting is better than that of Ooh Media
Limited as it has implemented integrated reporting guidelines in its business.

15CONTEMPORARY ACCOUNTING THEORY
References:
Adams, C. (2017). Understanding integrated reporting: the concise guide to integrated
thinking and the future of corporate reporting. Routledge.
Allee, K., Campbell, J., Curtis, A., Hales, J., Jorgensen, B., Krische, S., ... & Wang, C.
(2015). Response to the IASB Invitation to Comment: Conceptual Framework for
Financial Reporting (ED/2015/3).
Member.afraccess.com. (2019). Retrieved 7 June 2019, from
http://member.afraccess.com/media?id=CMN://2A1134538&filename=20190225/
Barker, R. (2015). Conservatism, prudence and the IASB's conceptual
framework. Accounting and Business Research, 45(4), 514-538.
Brown, J., & Dillard, J. (2014). Integrated reporting: On the need for broadening out and
opening up. Accounting, Auditing & Accountability Journal, 27(7), 1120-1156.
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.
Churet, C., & Eccles, R. G. (2014). Integrated reporting, quality of management, and
financial performance. Journal of Applied Corporate Finance, 26(1), 56-64.
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.
Flower, J. (2015). The international integrated reporting council: a story of failure. Critical
Perspectives on Accounting, 27, 1-17.

16CONTEMPORARY ACCOUNTING THEORY
Flower, J. (2018). Global financial reporting. Macmillan International Higher Education.
Frias‐Aceituno, J. V., Rodríguez‐Ariza, L., & Garcia‐Sánchez, I. M. (2014). Explanatory
factors of integrated sustainability and financial reporting. Business strategy and the
environment, 23(1), 56-72.
Gornik-Tomaszewski, S., & Choi, Y. C. (2018). The Conceptual Framework: Past, Present,
and Future. Review of Business, 38(1).
Henderson, S., Peirson, G., Herbohn, K., &Howieson, B. (2015). Issues in financial
accounting. Pearson Higher Education AU.
Herremans, I. M., Nazari, J. A., &Mahmoudian, F. (2016). Stakeholder relationships,
engagement, and sustainability reporting. Journal of Business Ethics, 138(3), 417-
435.
Higgins, C., Stubbs, W., & Love, T. (2014). Walking the talk (s): Organisational narratives of
integrated reporting. Accounting, Auditing & Accountability Journal, 27(7), 1090-
1119.
Integrated Reporting. (2019). Integratedreporting.org. Retrieved 4 June 2019, from
https://integratedreporting.org/
Kerr, J., Rouse, P., & De Villiers, C. (2015). Sustainability reporting integrated into
management control systems. Pacific Accounting Review, 27(2), 189-207.
Lodhia, S. (2015). Exploring the transition to integrated reporting through a practice lens: an
Australian customer owned bank perspective. Journal of Business Ethics, 129(3),
585-598.
Mesoblast.com. (2019). Retrieved 7 June 2019, from https://www.mesoblast.com/images/186

17CONTEMPORARY ACCOUNTING THEORY
Pinnock, H., Barwick, M., Carpenter, C. R., Eldridge, S., Grandes, G., Griffiths, C. J., ... &
Sheikh, A. (2017). Standards for reporting implementation studies (StaRI)
statement. Bmj, 356, i6795.
Serafeim, G. (2015). Integrated reporting and investor clientele. Journal of Applied
Corporate Finance, 27(2), 34-51.
Stubbs, W., & Higgins, C. (2014). Integrated reporting and internal mechanisms of
change. Accounting, Auditing & Accountability Journal, 27(7), 1068-1089.
Sustainability Reporting. (2019). Globalreporting.org. Retrieved 4 June 2019, from
https://www.globalreporting.org/information/sustainability-reporting/Pages/
default.aspx
Yong, K. O., Lim, C. Y., & Tan, P. (2016). Theory and practice of the proposed conceptual
framework: Evidence from the field. Advances in accounting, 35, 62-74.