Case Study: Analyzing Financial Reporting Issues at AGL Energy

This case study analyzes various accounting and corporate social responsibility issues within AGL Energy. It examines five key areas: financial management, taxation transparency, strong and ethical governance, environmental issues, and social issues. The analysis applies accounting theories, particularly agency theory, to understand the motivations behind AGL Energy's initiatives and actions. The study explores aspects like profitability, energy sales, and cost efficiency within financial management, along with the company's commitment to tax compliance and transparency. Ethical governance, environmental sustainability, and social initiatives related to workplace culture are also evaluated. The document provides recommendations for AGL Energy, including continued compliance with financial reporting standards, adherence to ethical conduct, and enhanced efforts in environmental and social responsibility. The study uses the provided references for the analysis and the recommendations.

ACCOUNTING THEORY AND ISSUES
The Case Study of AGL
Energy

INTRODUCTION
The main aim of this video is the analysis
of certain issues in AGL Energy. It aims at
the analysis and evaluation of five
different issues in the financial reporting
and corporate social responsibility
reporting of the company. In addition,
these issues are analyzed in lights of the
appropriate accounting theories so that
they can be evaluated in a better manner.

FIVE ISSUES IN AGL ENERGY
This part involves in the analysis of the
five key issues in the business operations
of AGL Energy. The issues are as below:
1. Reliability of Financial Management
2. Taxation Transparency
3. Strong and Ethical Governance
4. Environmental Issues
5. Social Issues

FINANCIAL MANAGEMENT
This a key material issue in AGL Energy.
Four major aspects under this issue; they
are:
Profitability,
Energy Sales,
Wholesale gas portfolio and
Cost efficiency.
The management of AGL Energy has
disclosed the necessary information on
their effective management of the four
aspects of financial management

FINANCIAL MANAGEMENT
(Cont.)
These initiatives or the motive of the management of AGL Energy can
be explained with the light of an accounting theory that is agency
theory. This theory states that the interest of the managers is not
necessarily in line with the interest of the stakeholders and
management is needed to consider making business decisions that are
in line with the requirements of the shareholders (Brown and Forster,
2013).
According to the agency theory, the main motive of the management
of AGL Energy should be to provide the information related to financial
management to the stakeholders like their investors, shareholders and
other users of the financial statements so that they can know the
company’s undertaken steps or measures for effective financial
management. The management of AGL Energy can gain the trust of
these stakeholder groups through providing this information to them
and this will lead to the resolution of the problem between the
management of the company and the shareholders.

TAXATION TRANSPARENCY
According to the 2018 Sustainability Report of AGL Energy, another
crucial material issue to the company is Taxation and transparency.
Regarding this issue, the company has mentioned their main
responsibility that is to adhere to all taxation related obligations and
to maintain transparency in disclosing the details of the taxes that
the company pays along with the taxation rules and policies that
they have implemented (2018sustainabilityreport.agl.com.au, 2019).
AGL Energy has strong commitment to meet all the obligations
related to tax compliance and to provide the stakeholders with the
information about the taxation policies and tax payment. The
undertaken initiatives are the satisfaction of all tax obligations,
proper identification of tax risks along with effectively manage and
communicate them with the key stakeholders and senior
management, maintain a co-operative as well as transparent
relationship with the taxation authority and ensuring the proper
management of tax risks (Bonsón and Bednárová, 2015).

TAXATION TRANSPARENCY
(Cont.)
The intention and motive of the management of AGL Energy
behind maintaining taxation and transparency can be explained
in light of the agency theory since this theory considers the
agency problem. This particular theory states that problems occur
within business organizations when the interest of the
shareholders are not satisfied by the management of the
company (Fernando and Lawrence, 2014).
In case of AGL Energy, the management of the company can
solve this agency problem by complying with the rules and
regulations of taxation and transparency which provide them the
scope to use the necessary resources to maintain their business
operations successfully. This reasons lead to the effective
handling of this issue by the management of the company. This
will lead to the resolution of the agency theory between the
shareholders and the management of AGL Energy.

STRONG AND ETHICAL
GOVERNANCE
To the management of AGL Energy, Strong and ethical
governance is considered as one of the most important as well
as material issue in their sustainability performance. The main
approach of the company to address this issue is to act in the
most ethical manner in the presence of a string governance
structure that supports a culture of accountability, fairness and
transparency (2018sustainabilityreport.agl.com.au, 2019).
Under this issue, the company has provided greater importance
to certain aspects like effective corporate governance policies
that includes the company’s Board and Committee, code of
conduct, instruction and training programs, privacy, effective
resolution of the workplace related issues, strong action against
bribery and corruption and risk and compliance management
(Kennedy Nyahunzvi, 2013).

STRONG AND ETHICAL
GOVERNANCE (Cont.)
The adopted initiatives as well as corrective measures of AGL
Energy for ethical governance can be explained with the help
of the agency theory. According to the concept of this theory,
the aim of both the managements of the companies and the
stakeholders is to maximize their own profit which often lead
to the occurrence of conflict between these two parties.
The same aspect can be seen in the case of AGL Energy. As
per this theory, the agency problem between the
management of the firm and the shareholders can be
resolved in case the management ensures the
implementation of social and ethical governance practice
within the organizations. This provides the company with the
required support of the shareholders and the shareholders
get the chance to maximize their wealth

ENVIRONMENTAL ISSUES
AGL Energy has considered two issues as the major material
issues under their environmental initiatives; these two issues
are:
Transition to low carbon energy and
Renewable energy
The undertaken steps by the company to address these
issues are to provide the market with reliable, affordable and
sustainable energy options, not extending the operational life
of any existing coal-field power station, improve the
greenhouse gas efficiency, continuation in the investment in
renewable energy, make the innovative as well as cost-
effective solutions available for the market, incorporation of
the forecasted future carbon prancing and others.

ENVIRONMENTAL ISSUES (Cont.)
The initiatives of the management of AGL Energy
can be explained with the help of agency theory.
According to the concept of agency theory, it is
needed for the companies to take considerable
actions the maximization of the wealth of the
shareholders (Chauvey, et al., 2015).
As per the concept of the agency theory, the main
motive of the management of AGL Energy to take
the above-mentioned environmental initiative is
to do well for the shareholders so that the agency
problems can be resolved in proper manner.

SOCIAL ISSUES
Under the social issue, the management of AGL Energy has considered their people
as their greatest asset and taken different initiatives to solve the material issues
regarding them. The company has focused on certain crucial material issues related
to their people; they are:
Workplace culture and talent,
Health and safety and
Contactor and supplier management (2018sustainabilityreport.agl.com.au, 2019).
Some of the major undertaken initiatives of the company under workplace couture
and talent are embedding the refreshed culture values of the company into the
working environment along with the leadership techniques, embedding the
enterprise-based view on talents, development of a new assessment tool for
checking the health of the company’s culture, transformation of the experience of
the employees through delivering best in-class, integrated and simple technology as
well as digital solution in a more efficient and energetic manner and others. At the
same time, the company has incorporate certain values to deal with this material
issue; they are Safety and beyond, Sustainable thinking, Inclusive of all and Focused
on what matters. Apart from the above, the management of AGL Energy has taken
other major initiatives in order to effectively deal with this crucial issue (Patten and
Zhao, 2014).

SOCIAL ISSUES (Cont.)
It needs to be mentioned that these initiatives of the company
regarding their people can be explained in the light of the agency
theory. This theory states that a company should work such a
manner so that they can fulfill the demand of their shareholders
(Thijssens, Bollen and Hassink, 2015). It is crucial to mention this
aspect that employees are considered as one of the crucial resources
that the organizations need for ensuring their existence and
successful operation. This aspect works as a major motive for the
company to take the necessary steps and initiatives for ensuring the
well-being of their employees so that they can fairly use them for
their business purposes.
This is considered as crucial aspect for AGL Energy. Shareholders of
the companies demand the well-being of the whole organization that
includes the well-being of the employees. As per agency theory, the
management of the company can maximize the wealth of the
shareholders by taking care of their shareholders.

RECOMMENDATIONS
The recommendations are as below:
• It is recommended to the management of AGL Energy to
continue their compliance with the required financial
reporting standards and accenting policies. It is also
recommended to the management of AGL Energy that
they must disclose the crucial financial information so
that the users can ascertain the financial performance
and position of them.
• In order to maintain the required transparency in the
taxation related transactions, the management of AGL
Energy is recommended to continue their adherence to
the respective taxation authority so that taxation can be
charged on their income in fair manner.

RECOMMENDATIONS (Cont.)
• It is recommended to the management of AGL Energy to keep their
compliance with their ethical standards as well as code of conducts
in order to ensure the continuation of their business operations in the
most ethical as well as transparent manner.
• In case of the environmental initiatives of AGL Energy, the
management is recommended to take more initiatives to diminish
the negative impact of their business operation from the
environment. It is also recommended to AGL Energy that they must
ensure reporting these undertaken initiatives in the sustainability
report so that people can become aware of their environment related
initiatives.
• Lastly, in case of the social initiatives regarding people, the
management of AGL Energy is recommended to ensure taking
effective initiatives to ensure the health and safety of their
organizational people since it is a crucial aspect to maintain the well-
being of the organizational people.

REFERENCES
• 2018 Sustainabilityreport.agl.com.au. 2019. 2018 Sustainability Report. [online] Available at:
https://www.2018sustainabilityreport.agl.com.au/xmlpages/resources/TXP/agl_energy/susrep/pdf/AGL_Energy_2018_Sustainability_Report.pdf [Accessed 15
May 2019].
• agl.com.au. (2019). Our approach to the environment. [online] Available at: https://www.agl.com.au/about-agl/sustainability/our-approach-to-the-environment
[Accessed 18 May 2019].
• agl.com.au. 2019. Corporate Governance. [online] Available at: https://www.agl.com.au/about-agl/who-we-are/our-company/corporate-governance [Accessed 18
May 2019].
• Bonsón, E. and Bednárová, M., 2015. CSR reporting practices of Eurozone companies. Revista de Contabilidad, 18(2), pp.182-193.
• Bosse, D.A. and Phillips, R.A., 2016. Agency theory and bounded self-interest. Academy of Management Review, 41(2), pp.276-297.
• Crowther, D. and Seifi, S. eds., 2018. Redefining Corporate Social Responsibility. Emerald Group Publishing.
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