ACC3210 Analysis of Corporate Reporting: Sustainability Report

1.

Company boards, executives, and management are investing more and more time and resources on issues of sustainability - such as carbon (greenhouse gas emissions), energy efficient technology, water use, cleantech, and biodiversity, to name just a few. An important part of the global push towards sustainability practices involves a need to account for, and report on, sustainability - sometimes referred to as environmental, social, and governance (ESG) reporting 

“Company boards, executives, and management are investing more and more time and resources on issues of sustainability - such as carbon (greenhouse gas emissions), energy efficient technology, water use, cleantech, and biodiversity, to name just a few. An important part of the global push towards sustainability practices involves a need to account for, and report on, sustainability - sometimes referred to as environmental, social, and governance (ESG) reporting (IAS Plus, 2017).

Required:

Critically discuss the above statement by outlining why do companies should provide sustainability report in the company annual report? How is the International Integrated Reporting Council (IIRC) playing an important role in developing sustainability reporting guidelines/framework for corporations throughout the world?

2. 

Laurence Ltd commences its operations on 1 July 2015. One year after the commencement of its operations (30 June 2016) the entity presents its first Statement of Comprehensive Income and Statement of Financial Position on 30 June 2016. The statements are prepared before considering taxation. The following information is available.

Laurence Ltd:

Statement of Comprehensive Income for the year ended 30 June 2016

Assets and Liabilities as disclosed in the Statement of Financial Position for the year ended 30 June 2016

Required:

• Compute the taxable income or loss.
• Complete the Taxation Worksheet on the next page in accordance with AASB 112 Income Taxes.
• Prepare the applicable journal entries at 30 June 2016 to account for tax using the balance sheet method.

1: Introduction

The advantage of sustainability reporting go past further than the organisation monetary risk and opportunity to execute performance along with the ESG dimension and creating authorization to work. It is worth mentioning that sustainability disclosure can act as the differentiator in competitive industries and promote the assurance of investors along with trust and employee loyalty. It is opinion that analyst have often emphasised on the sustainability disclosure of the company while assessing management quality and efficiency as sustainability reporting provides firm with better access to capital. Several researchers have noticed that sustainability disclosure is used to assist the analyst in determining the value of firm. Sustainability reporting necessitates organisations to collect data regarding process and impacts which they have not yet measured before. In relation to the better lucidity concerning performance of the organisation towards sustainability reporting, provide organisations with information that is essential to cut down the usage of natural performance.

The GRI guidelines helps in emphasising those companies must consider that environmental and social aspect that forms most si

Discussion: 

A large number of concerns involving pollution, climatic change, issues relating to human rights and economic crisis have paved the way for companies to towards the ongoing public disclosure relating to the role of business in society. Sustainability reporting is mandatory for companies to include in their annual report with the requirement for better lucidity, sustainability and accountability in business. As opinion by Ioannou and Serafeim (2016), sustainability reporting assists organisations to determine, understand and converse their economic, environmental and communal performance. Including sustainability report in annual report enables companies to set goals and monitor change more efficiently. According to Milne and Gray (2013), it is fundamental for business to build and maintain trust in order to achieve sustainable economy and world. Day to day decisions that are made by the business have direct impact on their stakeholders. This includes financial institutions, labour organisations, civil society and citizens in relation to the degree of trust, which they have with them. Such decisions not often forms the part of monetary information single-handedly as they are based on the evaluation of risk and opportunity by making use of data on wide range of instant and future issues.

As notified by Hahn and Kühnen (2013), several companies are involved in sustainability activities without the issue of reports. Organisations that prepares the report based on sustainability are ranked at higher places than those that does not report. Including sustainability in annual report though helps in improving the reputation however, it is not the primary reason that companies include sustainability in annual report. A variety of internal and external drivers influences companies to include sustainability reporting. Including sustainability, report provides executives, shareholders and investors with assurance that sustainability risk is monitored. For several firms growth in social responsibility investment forms the most compelling reason of indulging in sustainability reporting (Fonseca, McAllister and Fitzpatrick 2014). The market for responsible investment is not restricted to public or investors as mainstream analyst have also expressed their appetite for sustainability information. In several countries sustainability reporting is considered mandatory either with the help of exchange or through the help of government. Stock exchanges from more than twenty nations have strongly encouraged several companies to provide sustainability report or similar type of disclosure (Del Mar et al. 2015).

GRI it has long asserted that sustainability disclosure provides reporting organisations a wide range of intangible benefits in the areas of employee loyalty and customers benefits. In an argument put forward by Initiative (2014), value of sustainability disclosure have also extended the balance sheet of the firm. An analysis on more than two hundred independent studies have examined association of corporate social and environmental performance towards corporate financial performance have recommended that organisations have benefited from augmented communication of their good deeds.

As stated by Hahn and Lülfs (2014), providing sustainability, report might lead to the foundations of innovative and less expensive sources of the capital. By reporting the sustainability initiatives organisations are able to convince the possible sources of equity that they are competitive and lower-risk investments. In a recent study, it is suggested that investors have expressed their interest in preferably investing in transparent organisations due to the greater stakeholder-manager trust. Flower (2015), have opinion that sustainability disclosure by firms enables the investors with high amount of information than government-regulated firms. Hence, disclosure is positively related with the return on asset and cash flow from operations.

The international integrated reporting council have piloted its methodology for organisations to generate financial, environmental and governance report so that it can develop value over time. IIRC also plays an important role in developing new tools with particular interest being focused on the Sustainability Accounting Standards Board for appealing the financial market (Frias?Aceituno et al. 2013). The IIRC framework plays a key role in understanding the financial and common metrics in order to benchmark their performance. The IIRC framework enables the companies to take time through special societal impacts by building relevant associated KPI. Studies have suggested that reporting influences behaviour and IIRC plays a vital role in providing detailed description of performance than the conventional reporting. One of the central functions of IIRC is to guide organisation on communicating wider set of information that is required by the shareholders and stakeholders so that companies can assess their long-term prospects under a clear, concise and similar format (Cheng et al. 2014). IIRC framework provides those organisations, shareholders and others to create an improved long term and short-term decisions.

Conclusion: 

Organisation that includes integrated reporting and sustainability report will not only display their stewardship in financial capital but will also in human, natural, social and other capitals that aligns with the interest of several society and interested groups. Integrated reporting provides emphasis on the stakeholder engagement, which in turn is more likely to result in greater consultation with social civilization interested group. With increasing number of companies issuing sustainability report analyst have anticipated that public and investors demand for outer assurance of sustainability report will increase in future. Hence, sustainability reporting not only helps in promoting seriousness but also promotes reliability.

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References:

Abeysekera, I., 2013. A template for integrated reporting. Journal of Intellectual Capital, 14(2), pp.227-245.

Barkoczy, S., 2016. Foundations of Taxation Law 2016. OUP Catalogue.

Cheng, M., Green, W., Conradie, P., Konishi, N. and Romi, A., 2014. The international integrated reporting framework: key issues and future research opportunities. Journal of International Financial Management & Accounting, 25(1), pp.90-119.

del Mar Alonso-Almeida, M., Marimon, F., Casani, F. and Rodriguez-Pomeda, J., 2015. Diffusion of sustainability reporting in universities: current situation and future perspectives. Journal of cleaner production, 106, pp.144-154.

Flower, J., 2015. The international integrated reporting council: a story of failure. Critical Perspectives on Accounting, 27, pp.1-17.

Fonseca, A., McAllister, M.L. and Fitzpatrick, P., 2014. Sustainability reporting among mining corporations: a constructive critique of the GRI approach. Journal of Cleaner Production, 84, pp.70-83.

Frias?Aceituno, J.V., Rodriguez?Ariza, L. and Garcia?Sanchez, I.M., 2013. The role of the board in the dissemination of integrated corporate social reporting. Corporate Social Responsibility and Environmental Management, 20(4), pp.219-233.

Hahn, R. and Kühnen, M., 2013. Determinants of sustainability reporting: a review of results, trends, theory, and opportunities in an expanding field of research. Journal of Cleaner Production, 59, pp.5-21.

Hahn, R. and Lülfs, R., 2014. Legitimizing negative aspects in GRI-oriented sustainability reporting: A qualitative analysis of corporate disclosure strategies. Journal of Business Ethics, 123(3), pp.401-420.

Initiative, G.R., 2014. Sustainability Reporting Guidelines [Online] Available: https://www. globalreporting. org/resourcelibrary. GRIG4-Part1-Reporting-Principles-and-Standard-Disclosures. pdf Accessed, 20.

Ioannou, I. and Serafeim, G., 2016. The consequences of mandatory corporate sustainability reporting: evidence from four countries.

Milne, M.J. and Gray, R., 2013. W (h) ither ecology? The triple bottom line, the global reporting initiative, and corporate sustainability reporting. Journal of business ethics, 118(1), pp.13-29.