Accounting Theory and Issues: Comprehensive Analysis of Boral Limited

This report provides an in-depth analysis of accounting theory and its practical application, using Boral Limited, a multinational manufacturing company, as a case study. The report begins with an introduction to accounting theory, explaining its role in financial reporting and decision-making. It then delves into various aspects of the business, including social issues, such as the increasing importance of ethical practices; environmental issues, focusing on the company's environmental impact and risk management; ethical issues in accounting, including fraudulent financial reporting and misappropriation of assets; and taxation, examining the interplay between accounting and tax regulations. The report highlights the importance of accounting theory in addressing contemporary business challenges and ensuring accurate and transparent financial reporting. The report also considers the impact of accounting theories irrespective of the size and complexity of the Boral Limited and it gives adequate importance to various factors mentioned above.

qwertyuiopasdfghjklzxcvbnmqwertyui
opasdfghjklzxcvbnmqwertyuiopasdfgh
jklzxcvbnmqwertyuiopasdfghjklzxcvb
nmqwertyuiopasdfghjklzxcvbnmqwer
tyuiopasdfghjklzxcvbnmqwertyuiopas
dfghjklzxcvbnmqwertyuiopasdfghjklzx
cvbnmqwertyuiopasdfghjklzxcvbnmq
wertyuiopasdfghjklzxcvbnmqwertyuio
pasdfghjklzxcvbnmqwertyuiopasdfghj
klzxcvbnmqwertyuiopasdfghjklzxcvbn
mqwertyuiopasdfghjklzxcvbnmqwerty
uiopasdfghjklzxcvbnmqwertyuiopasdf
ghjklzxcvbnmqwertyuiopasdfghjklzxc
vbnmqwertyuiopasdfghjklzxcvbnmrty
uiopasdfghjklzxcvbnmqwertyuiopasdf
ghjklzxcvbnmqwertyuiopasdfghjklzxc
ACCOUTING THEORY & ISSUES

Accounting theory
Executive Summary
The report sheds light on the accounting theory and issues that is seen in the ordinary course of
business. This has been considering the organization Boral Limited. The discussion pertains to
the matters that deal with the business issues. It considers various aspects such as social issues,
environmental issues, taxation issue, and employment issue. Over the past 20 years there has
been significant increment in the accounting theories and application thereby giving a strong
impetus to the concerns. Various aspects need special treatment and hence, such matters have
been taken into consideration. Irrespective of the size and complexity of the Boral Limited the
impact of accounting theories cannot be neglected. Therefore, the report is presented in a manner
that gives adequate importance to various factors mentioned above.
2

Accounting theory
Contents
Introduction.................................................................................................................................................3
Social issues.................................................................................................................................................4
Environmental Issues...................................................................................................................................4
Ethical issues in accounting.........................................................................................................................5
Taxation.......................................................................................................................................................7
Wages..........................................................................................................................................................7
Conclusion...................................................................................................................................................9
References.................................................................................................................................................10
3

Accounting theory
Introduction
Accounting theory can be explained as assumptions, guidelines and methods utilised in the
study, as well as financial reporting principles application. The concept of accounting theory is
infused with the review historical foundation of accounting practices and the manner in which
the methods are varied and applied to the framework of regulation that guides financial
statements and reporting (Brigham & Daves, 2012). Herein, Boral Limited, a multinational
manufacturing company has been selected that supplies building and construction materials.
While procedures of accounting are formulaic, accounting theory is more qualitative because that
can be defined as the road map to effective accounting, as well as financial reporting. The main
view of accounting theory is utility that in the world of company herein Boral Limited means
corporate financial statements should reflect data that can be utilized to make decision that are
informed. This projects that accounting theory is flexible and enables to produce financial
information that is useful when the legal scene varies.
Aim – The primary objective of accounting is to maintain a complete, as well as systematic
record of every transaction and evaluate the business financial position. Every individual or the
process of business is needed to know about the financial transactions. Hence, aim of accounting
theory is to develop the critical objectives of financial reporting.
Background - Accounting theory needs that every accounting, as well as financial professional
functions under four significant assumptions. The initial premise defines that the business is
different from the owners. The second strikes the notion that the company will operate and will
not be insolvent. Thirdly, there is an assumption that all financial statements are done with dollar
amount and does not depend on other unit production (Brigham & Ehrhardt, 2011). Finally,
Boral Limited prepare the financial report on an annual basis.
Scope – Accounting rules, as well as principles projects to enhance the utility of the financial
documents through the creation of a frequent basis of understanding that is prevalent among
accountants and end users. Without the presence of such rules and principles, users would not be
able to understand, as well as interpret the documents correctly as the meanings will be left to the
4

Accounting theory
interpretation of an individual. In the case of such a situation accounting theories helps in proper
projection and analysis (Choi & Meek, 2011).
Social issues
It has been observed that management accounting is giving significant attention towards the
social and ethical problems for improvising professional practices and the academic research
programs. Another reason that may have caused Boral Limited to give more attention towards
the social and environmental impacts on the company is developing. Hence, it has become
essential for a company to act strategically. There have been many other problems and scandals
that may lead an organisation to undermine its social integrity and examples of ethical
misconduct like the Volkswagen Emissions Scandal, the Toshiba Accounting Scandal and the
Libor Scandal. Therefore, to maintain equilibrium in everyday work of an Boral Limited, it is
trying to take sustainable development measures and gradually decrease any other problem that
may be faced by the company in future (Davies & Crawford, 2012).
Another first reason behind the increasing importance of social and environmental issues is the
roots and base of the management accounting system itself. One of the most important and
necessary tasks that are carried out by the management accounting team is to carry out the
process of decision making and influencing the decision that has been made in the past. The
function leads to various types of problems that may be faced by an organisation because of the
social and ethical misconducts, which may further lead the company to suffer a massive loss in
the future.
Environmental Issues
The organizations face various types of environmental risks. They may be natural hazards or
human-made hazards that may have resulted because of failed engineered systems or any
manipulation in the physical order. Hence it is very probable to risk the financial stability of an
individual or an organization. By analyzing the environmental risks and issues with the help of
the corporate management systems, the organization will be able to identify measure and manage
all the types of threats that may prevail over it in future. The task of environmental risk
assessment consists of various screening techniques, prioritization, and evaluation of the
different types of risks that are to be faced by the organization in the future (Deegan, 2011).
5

Accounting theory
There are also multiple types of environmental hazards that may offer commercial opportunities
and potential benefits to the organizations. Some of the institutional investors have been making
descriptive and quantitative studies about the environmental risks and issues which can be used
to analyze all the problems in a much more detailed manner. There have been guidelines issued
by The National Association of Pension Funds and Association of British Insurers (ABI) about
the environmental issues and risks. It has also been clearly stated that there exists a need of
comparison, consistency, relevance, and reliability in the annual reports of an organization for
integration of the business that is being performed by the organization. Boral spent an
approximate of $300 million in terms of energy and emitted 2.5 million tonnes equivalent of
Co2. Hence, at the end of the financial year the company incurred a loss ranging $10 million due
to the influence of US hurricanes that were influenced by the climate change.
It has been observed that small businesses are also equally affected by environmental issues.
However, they lack the resources to identify various types of regulations and device suitable
systems to monitor or control the effects of social and ecological problems. There are different
types of help and online services that are provided by environment agency on a medium sized
and small enterprise basis for environmental management systems.
It is generally observed that Boral Limited is an organization having environmental impacts, and
then the participants of the financial statements will try to understand the policies of the
organization by keeping in mind all the issues that can be faced by it. Also, a competitive
advantage can be advanced by using proper methods to approach (Leo, 2011). Approaches like
investors, customers and employees information on the operations that are carried out on the
environmental management system or the compliance with the voluntary codes and laws of
ecological issues, analyzing the performance of the organization by comparing it to the
operational activities and their impact on the annual targets, reduction of emissions and waste, as
well as information on the environmental improvements that are to be undertaken after
consideration of all these facts.
Ethical issues in accounting
The accounting structure consists of various ethics which are concerned with ethical and moral
choices while preparing, presenting and disclosing the financial accounts to the stakeholders and
6

Accounting theory
other users. There were a lot of scandals reported during the 1900s and 2000s which made this a
huge issue. By analyzing these issues in the accounting ethics, it will be beneficial for an Boral
Limited to ensure that the actions that are being carried out for conducting the business are
ethical and provide proper implications of the activities.
Fraudulent financial reporting
It has been observed that most of the accounting scandals in the last two decades are based on the
fraudulent financial reporting systems. The fraudulent financial reporting is the preparation of
false statements in the financial accounts by the company management for misleading the
investors and maintaining the share price of the organization in the stock exchange. These
misleading factors in the financial reports main result in the post of company stock price in the
short term but will always affect the working in the long run because of which the company may
face huge problems and losses (McDonough & Shakespeare, 2015)
Misappropriation of assets
The fundamental ethical issues in financial accounts that are made by the employees are the
misappropriation of assets. Misuse of assets can be understood as the use of the company’s
results for any other purpose rather than the company’s interest. Misuse of the asset can also be
termed as stealing or embezzlement. It can be understood with the help of an example where a
senior level executive mien organise a family dinner for him and charge the company for it. Also
if any of the employees may take the office supplies home for personal use, the misappropriation
of assets will be observed.
Disclosure violations
Disclosure violations are a part of fraudulent financial reporting or errors of ethical omission.
The principle of full disclosure that is mentioned in the generally accepted Accounting Principles
if violated can be considered as a fraudulent financial reporting. This is because of the failure to
disclose the information to the investors that can be used by them to make decisions about the
investments that are to be made in the company (Melville, 2013). It is essential for the company
executives to manage the proprietary and formation and provided to the users of the financial
accounts.
7

Accounting theory
Penalties
It has been observed that the penalties for violation of any guarantee of accounting ethics have
increased because of the new act that has been coming into force. The new law allows for harsh
penalties if any manipulation of data has been made in the financial accounts of an organisation.
Any interference can be duly stated, and the whistleblowers will have legal protection rights for
them. Also, the top management structure and the chief executives of the organisation will be
held criminally liable to pay for misreporting of the financial accounts of their organisation.
Taxation
It is a clear fact that tax and accounting both are an essential part of an organization but the
function independently. In the present condition, it has been observed that the employees play a
verify crucial role in the financial success or failure of an organization because of which it is
essential for them to change some practices. It is a common parlance that the growth, as well as
development has led to the development of income tax. The field of accounting and taxation has
seen a substantial increment in the past half century. Accounting profession is actively inter
related with that of the federal taxation and taxation is based upon the income that is determined
with the theories (Merchant, 2012). Boral Limited and the wholly owned entities are component
of the consolidated group. Due to this, the members of the consolidated group are considered as a
single entity. Boral Limited is the head entity within the consolidate tax group.
When it comes to the traditional business model, the employees are considered to be an expense.
The expenses of salaries, advantages, hiring and firing forgiven much more important than the
contributions that were being given by the employees to the organization. No income tax will be
possible if the employee are not working or absent from the work. Nowadays, the companies
recognize the role of the employees and pay them on their value of creativity and profit
contributing nature. This has not only helped to appreciate the focus on the human capital
Management strategies but also have helped to expand the employee resources (Mersland &
Urgeghe, 2013). It is important that Boral Limited should understand the role of employee in the
success of the business. perspective such as output of employee, creativity, and problem-solving
can be defined as useful because it lead to production of revenue.
8

Accounting theory
Wages
It is also essential for an organization to measure any incongruent measures that may provide
management with incentives to destroy its value. It is necessary for Boral Limited to limit the
bonus plan and create an overall corporate strategy that can help the organization to discuss the
controllability. The organization that is not listed on the stock exchange faces enormous
challenges while estimating any value in the assessment of financial information. It is essential
while making these estimations to carry out a reliable and accurate signal of value-creating so
that the organization can have real-time knowledge of all the current cash flows and the future
cash flows that it is going to acknowledge. This includes forecasting, timing, and estimation of
any risks that may make the task of financial reporting time consuming and difficult (Yoo, Choi
& Pae, 2017). Liabilities for wages and salaries for Boral Limited contain benefits of non-
monetary nature and annual leave is required to be completed within 12 months of the date of
reporting, this is measured at the expected amount needed to be paid when the settlement of
liabilities are done.
It has been observed that the managers in both public and private sectors are facing diverse and
complex ethical challenges that are making it hard for performing the function of decision
making for tasks such as hiring, promotions, compensations, suppliers and community affairs.
The experienced managers who have cultural diverse environmental experiences can fish even
more difficult conflicts and decision making processes because of which they can handle at the
different ethnic background and different rankings for various decision making and values
(Needles & Powers, 2013). This can be clearly understood by taking an example of people who
are having low context culture and individualistic societies because of which their level of
importance of the facts on fruits like universal to collect higher loyalty points and function more
like particularizes. Workers who work with uncertainty and try to avoid cultures and conflicts
can have a bad relationship with the superior your colleague because of the unavoidable and low
power distance environment in which they work. These working conditions may make the
situation riskier because of which the relationship between the employees and the superiors in
the workplace can be hampered. Hence, it is essential for all the global managers to be aware of
any differences that have been present in the values, behaviour, and expectations of all the
employees and his superiors (Parrino, Kidwell & Parrino, 2012). It is also essential for them to
hack technically so that they can become socially responsible and culturally competent for
9

Accounting theory
working in an inspiring manner and achieve creativity innovation and higher productivity at the
whole.
10

Accounting theory
Conclusion
According to the report and the accounting theory, it is evident that the accounting theory is set
of assumptions and helps the business regarding financial reporting. The main aim of accounting
theory is to review and assess the accounting practices that are done so that a proper regulatory
framework can be done. However, it is not free from defect and various factors needs to be
considered in this regard. There must be a proper set of rules, as well as regulations that will help
in the formulation of plans and policies. Accounting theory in practice is qualitative and hence is
a guide for effective accounting however carries specific problem that needs to be understand.
The company should look into the prospect and ensure that the business does not suffer. Issues
might pertain to social, environmental, wages or ethics and the same must be considered with
precision. The best way to deal with these kinds of problems is to incorporate any policy that can
help the organization to affect the bonus bank balance only after the period where the CEO has
left the organization. This will also help the organization to reflect high degree and long-term
valued creation of projects.
11

Accounting theory
References
Brigham, E., & Daves, P. (2012). Intermediate Financial Management. USA: Cengage
Learning.
Brigham, E.F. & Ehrhardt, M.C. (2011) Financial Management: Theory and Practice, USA:
Cengage Learning.
Boral Limited. (2018) Boral Limited Annual report & accounts 2018. Available from:
https://www.boral.com/sites/corporate/files/media/field_document/Boral-Annual-Report-
2018.pdf [Accessed 20 January 2018]
Choi, R.D. & Meek, G.K. (2011) International accounting. Pearson .
Davies, T. and Crawford, I. (2012) Financial accounting. Harlow, England: Pearson.
Deegan, C. M. (2011) In Financial accounting theory. North Ryde, N.S.W: McGraw-Hill
Leo, K. J. (2011). Company Accounting. Boston:McGraw Hill
McDonough,R.P & Shakespeare, C.M .(2015) Fair value measurement capabilities, disclosure,
and the perceived reliability of fair value estimates: A discussion of Bhat and Ryan. Accounting,
Organizations and Society. [online] vol. 46, 96–99. DOI: 10.1016/j.aos.2015.05.003
Melville, A. (2013) International Financial Reporting – A Practical Guide. 4th edition. Pearson,
Education Limited, UK
Merchant, K. A. (2012) Making Management Accounting Research More Useful. Pacific
Accounting Review. [online]. 24(3), 1-34. Available from
https://pdfs.semanticscholar.org/6ccf/f78a452763f17ed5e4f4ddc6b96703801403.pdf [Accessed
20 January 2018]
Mersland, R., & Urgeghe, L. (2013) International Debt Financing and Performance of
Microfinance Institutions. Strategic Change. 22, 36-47. Doi:10.1002/jsc.1919.
Needles, B.E. & Powers, M. (2013) Principles of Financial Accounting. Financial Accounting
Series: Cengage Learning.
Parrino, R, Kidwell, D. & Bates, T. (2012) Fundamentals of corporate finance. Hoboken
Yoo, C.Y, Choi, T.H & Pae, J. (2017) Demand for fair value accounting: The case of the asset
revaluation boom in Korea during the global financial crisis. Journal of Business Finance &
12