Commonwealth Bank and Carbon Reporting: A Financial Perspective

This report examines the crucial role of carbon credits and carbon liabilities within the framework of financial reporting, particularly in the context of Australian Accounting Standards Board (AASB) standards. It provides a comprehensive overview of the AASB 101 and AASB 137 standards, emphasizing their importance in disclosing environmental-related information and potential future liabilities. The report delves into the recognition and measurement of carbon credits and liabilities, offering insights into how organizations like the Commonwealth Bank of Australia address these issues in their annual reports. It analyzes a carbon-related issue reported by the Commonwealth Bank, providing comments on appropriate disclosure, and explores the investor's perspective in evaluating such disclosures. The report underscores the significance of the conceptual framework in disclosing material information to stakeholders, concluding with a discussion on the implications of these practices for financial performance and environmental sustainability.

Company and Financial reporting

Executive summary
The AASB is one of the most important accounting body that is set by the government of the
country so as to identify and develop the accounting standard for the purpose of better
development of the accounting disclosures. The accounting standard helps in giving the best
disclosure of the financial statements of the company to the users which includes the
stakeholders of the company. The AASB 101 helps in providing the disclosure of environment
related fundamentals and the steps taken by the company to reduce the same. also, the AASB
137 should be followed by the companies to identify the liability that may occur in future to the
companies which may be related to the environment protection and other factors. Also, the
conceptual framework must be followed by the company so that they are able to disclose the
material information related to the company to the stakeholders of the company.

Contents
Executive summary.........................................................................................................................2
Contents...........................................................................................................................................3
Introduction......................................................................................................................................4
Main body........................................................................................................................................5
Part A...............................................................................................................................................5
Discuss whether carbon credits and carbon liabilities should be presented in annual report of a
corporation...................................................................................................................................5
Recognition and measurement of carbon credits by an entity.....................................................6
Recognition and measurement of carbon liabilities by an entity.................................................7
PART B...........................................................................................................................................8
Example of a carbon-related issue that is reported in the annual report of Common wealth
bank of Australia along with comments related to appropriate disclosure..................................8
Perspective of the investor and evaluation of disclosure towards asset, liabilities and financial
performance of organization......................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

Introduction
Accounting standard refers to a set of principles, policies, and standards that define the basic
steps of financial accounting. Moreover, this is beneficial for a country for improving
transparency in financial transactions and reporting of them. AASB exists in Australia which
works as a board or committee. The main agenda of the Australian accounting standard is to
formulate and maintain financial reporting acts for Australia. They are applied in both public as
well as private sector of Australia. This report is written from the perspective of the
commonwealth bank of Australia which provides financial and investment services to its clients.
Further, the major focus of this report is on the issue of carbon credits and carbon liabilities.
Along with this there an example will also be considered for understanding the disclosures of
assets and liabilities of an organization.

Main body
Part A
Discuss whether carbon credits and carbon liabilities should be presented in annual report of a
corporation.
Carbon credits in Australia work as a permit for an organisation that provides to emanate carbon
dioxide and other gases. In the present scenario, it is mandatory for all organisations to holds
such a certificate to perform their operations constantly in a country. The main agenda to
implement carbon credits in a country is to minimize the emission of harmful gases from the
environment. Commonwealth Bank of Australia is focused and executed all rules to gain or
collect the carbon credit certificate from the ruling Australian government (ASB and Business,
2018).
AASB101 impacts on various function of an organisation, therefore, this is important for them to
make an effective statement for a business entity. This statement undertakes all statements for
ensuring all capabilities of existing as well as previous financial reports of an organisation.
Commonwealth Bank of Australia develops effective statements for the organisation to prepare
financial reports by undertaking all essential guidelines and requirements that are needed by
organisation to develop effective content. Whereas, disclosure, measurement and recognition
acts are different from presentation of financial which will also be discussed in later part of these
report. An organisation must include carbon credits in organisation due to which it is easy for
stakeholders to taking further decision such as about the investment and performance of them
towards organisational aspect (ASB, et. al., 2018).
Carbon liability of an organisation relates with the approximate value which is needed to be pay
by organisation for economic extension and realization of harmful gases in the environment.
Moreover, in present scenario most of the corporation are performing their work at a global
level. It determines that all activities of an organisation impact on the environment of the overall
globe. To overcome this management of commonwealth bank focused on formulating effective
budgets. Like with expanding industrialization from the last two centuries impacts on the globe.
So, company males carbon budget this results it is easy for them to relate their function with its
impacts on natural activities. On the other side while the formulation of balance sheet of

common wealth bank of Australia it is important for them to undertake carbon liability. This act
helps them to predict the estimated budget for performing CSR activities in the organisation.
Australia is an organisation that is expanding its day to day their operation to improve its global
economy. So, to maintain them effectively, some of standards are decided by the Australian
accounting standard committee which leads them to complete their work that are favourable for
organization, government and specifically for environment. In the context of carbon liabilities,
AASB 137 is needed to be executed or follow up on common wealth bank of Australia (Bar dill,
and Garrison, 2015). Further, the 137 acts of AASB states that an asset or liability of an
organisation that raises from past events and whose existence is need to confirmed with the
occurrence a non-occurrence of events. Further, they are not in control of a particular entity as it
managed by an industry and government of a country.
Recognition and measurement of carbon credits by an entity
The term carbon credits define the terms which is used by an organization for completion of
several task or operations by minimising its impacts on environmental factors. Common wealth
bank of Australia performing its business effectively in organisation by following, several
activities which is needed to be accomplished by management. This results in increases the
profitability of organisation by increasing its goodwill among customers for completion of their
task effectively. In recent years the livelihoods carbon funds which is a newly launched
investment funds for carbon related to an organisation. A major benefit of carbon funds in
organisation is used to make a sustainable development by overcoming the impacts of emission
gases in organisation (Chand, et. al., 2015).
Livelihoods carbon funds are targeted to improve the economic condition of Africa, Asia, and
America. To implement the improve changes in major continents of the world; the administration
of funds is focused to gather an amount of $ 118 million to restore the economic conditions of all
over the world. Commonwealth is operating their business sector. So, carbon credits are raised
by them in the form of mutual funds. Along with this to recognition them effectively they follow
the principle of additionality, its present investment efforts to develop an organisation
sustainably (Newberry, 2015).
On the other, this is also essential for organisation to calculate or measure the cost of
organisation that is mandatory to pay for implementing carbon credit policy in common wealth
bank of Australia. The accounting standard act of AASB 13 helps an organisation for calculating

the fair value of its operation and function. This act states that fair value of the products or
services must be decided by management. The rational price of the products helps leads common
wealth bank of Australia to purchase and sell their asset in the market. Further, the another
benefit that management easily recognize accurate prices of existing organisational asset and
liabilities. To implement this effectively they measure and monitor dates on which transaction
takes place. These assist them to maintain proper records for completion of their work in a
systematic and sequential manner.
Recognition and measurement of carbon liabilities by an entity
Carbon liabilities are determined as the process to analysis or predict how much pollution is
generated by organization for completion of their work. In present scenario, regular goals are
impacted by a corporation due to its less environmental factors. Therefore, to protect the interest
of local organisation AASB 137 is developed by organisation due to which effective corporation
between organisational government and organisation is maintained. There are several risks are
existing in economic conditions of a country it governs that industry is facing regular changes to
ensure the safety of the environment (Haider, 2015).
In present scenario due to the fast increase in industrialization activities, it is complex for the
environment to breath. This governs an increase in pollution, harmful gases and exploitation of
nature is impacting on environment in a negative way. All of the issues are raised due to the
increase in number of organisation and its activities which work to satisfy human needs.
Common wealth bank of Australia develops its infrastructure in those cities or districts which are
environment friendly (Laing and Perrin, 2014). Along with this some steps which is taken by the
bank are mention as follow:
 Management is using only those platforms which are environment friendly and are
essential to manage their portfolio.
 Most of the activities of the commonwealth bank of Australia are digitalized that also
release minimum harmful waves towards the environment.
 To maintain regulatory change, the organisation is also influencing and increasing
awareness to perform CSR activities among its stakeholders in order to secure the
environment.

PART B
Example of a carbon-related issue that is reported in the annual report of Common wealth bank
of Australia along with comments related to appropriate disclosure
Climate risk is the major concern of the common wealth bank of Australia, in this factor
organization specifically considers the changes that arise due to their operations, Example-
Common wealth bank provides safety from its physical risk in the way of insurance. Therefore,
to overcome this they develop a policy in which they provide insurance only those businesses or
corporations that are critically in danger (He, et. al., 2016). For better understanding that
represents how an organization can complete their work a table is mention as below:
Phase 1
Policy and governance
Phase 2
Evaluation of
portfolios
Phase 3
Encompassing scenario
analysis
Governance  Change in climate
position.
 Environment
policy
 Responsible
investing
framework.
The board of
common wealth
develops and
implements a risk
management
program for a
better
understanding of
environmental
issues.
To manage it properly
management constantly
monitors their position
for the completion of
tasks in an effective
manner.
Strategy  Committee of the
bank formulates
effective
agreements with
stakeholders in
order to complete
This factor is used
to reduce transition
risk that raise due
to performing
function for
accomplishing
Business leading
physical risk is related to
aspects that are essential
for organization to
manage to attract more
investors to purchase

improve
environmental
conditions.
organisational
goals. Australian
share funds are the
best example of
totally free from
transition risk.
their services. It is more
favourable because it
engages clients for the
completion of their
work.
Prioritization to
risk
management
Elevated and polluted
climate is a major risk
factor for organisation
due to which its financial
and non-financial is
impacted to complete
their work effectively.
ESG risk
assessment process
is executed by
organization for
completing their
work with more
efficiency. To
manage it
effectively
organisation uses
updated
information to
complete their
work.
Physical risk is a major
concern that is related to
the business lending
process. Update
utilization of tools leads
them to complete their
work in minimum time
factor by which
organisation make
changes to deal with
sensitive factors of
climate.
The above-stated table represent that organisation needs to disclose their operations or function
that are related to its carbon credit or liabilities. Commonwealth Bank of Australia follows the
AASB act 116, due to this it is easy for them to disclose all of its assets as well as liabilities
(Iqbal and Iqbal, 2015).
Commonwealth is listed on ASX; therefore, it is essential for them to list all of its asset and
liabilities that are related to economic exposure. Due to this act, it is easy for them to register
maintain environmental and social sustainability for overcoming carbon related factors. The
AASB act of 116 also considers some principle that is listed for completion of work effectively.
 It is needed that at least members are considering a decision from majority must be
provided to independent directors.

 The top authority such as the independent director is responsible to disclose carbon-
related issues.
 Members, as well as the charter of the committee, evaluates and monitor the changes that
raised due to regular issue regulatory modification of carbon-related issue.
Perspective of the investor and evaluation of disclosure towards asset, liabilities and financial
performance of organization
According to the present market, investors are major assets for an organisation that helps them to
achieve huge success in the industry (Joubert, et. al., 2017). Majority of the investor is more
favourable towards the perspective of dealing with organizational carbon-related issue. Some of
the major issue which is needed by organisation for completion of their work in an effective
manner are evaluated on several points that are explained as below:
Climate governance- The first factor which must improve by organisation is related to climate
and its governance need to be approved by the government. It generates trust among investors to
input their money in the market.
Doing business sustainability- To sustain business for a longer period effective services are
provided by banks. Such as commonwealth bank minimize its cost to increase the growth of their
profits.

CONCLUSION
In the end, by monitoring all the above points it is concluded that banks are a crucial part of a
country which helps them to improve their economy. This factor relates to various aspects like
accounting standard of disclosure, accounting standard for fair value measurement and many
more. This all are favourable for a corporation as it helps them to deal with various issue of
carbon and to ensure the environmental safety by reducing negative impacts from climate.

REFERENCES
ASB, A.A.S.B. and Business, B.G., 2018. Achievement and self-direction values, 23À24 Agency
theory, 52, 54 Agenda-setting theory, 165, 166 American economy, 29. small, 16, p.19.
ASB, A.A.S.B., Zone, A.S.E. and Network, B.G.B., 2018. Redefining Corporate Social
Responsibility. Agenda, 52, p.54.
Bar dill, J. and Garrison, N.A., 2015. Naming indigenous concerns, framing considerations for
stored biospecimens. The American Journal of Bioethics, 15(9), pp.73-75.
Chand, P., Patel, A. and White, M., 2015. Adopting international financial reporting standards
for small and medium‐sized enterprises. Australian Accounting Review, 25(2), pp.139-154.
Haider, S., 2015. Exploring the Relationship between Changes in Accounting Policies and
Valuation of Australian Banking Firms (Doctoral dissertation, Victoria University).
He, L., Evans, E. and He, R., 2016. The impact of AASB 8 operating segments on analysts’
earnings forecasts: Australian evidence. Australian Accounting Review, 26(4), pp.330-340.
Iqbal, S. and Iqbal, N., 2015. Financial reporting regime & financial statements antecedents
banking sector case of Pakistan. International Letters of Social and Humanistic Sciences, 59,
pp.126-130.
Joubert, M., Gravies, L. and Parle, G., 2017. Implications of the New Accounting Standard for
Leases AASB 16 (IFRS 16) with the Inclusion of Operating Leases in the Balance Sheet. The
Journal of New Business Ideas & Trends, 15(2), pp.1-11.
Laing, G. and Perrin, R.W., 2014. Deconstructing an accounting paradigm shift: AASB 116 non-
current asset measurement models. International Journal of Critical Accounting, 6(5/6), pp.509-
519.
Newberry, S., 2015. Public sector accounting: shifting concepts of accountability. Public Money
& Management, 35(5), pp.371-376.