Quality of Environmental Disclosures Resources †MyAssignmenthelp

Question: Discuss about the Quality of Environmental Disclosures Resources. Answer: Introduction The CBA (Commonwealth Bank of Australia) has diminished its share price from 1.5 percent to 76.60 (Sean, 2017) percent since shareholders were taking in the news that ARPA (Australian Prudential Regulatory Authority) banking regulator might glance at the company. ARPA is the body based on overseeing the superannuation, insurance and loan sectors of Australia. It has substantial authority and recently ordered banks to slow down their activities of providing loans to the property investors .Commonwealth bank and ARPA has declared that supervisor shall introduce a free panel in order to examine several issues which have concerns about the structure and exercises held in accountability, ethics and governance in commonwealth bank group, and have ruined the reputation of the bank and public standing. ARPA stated that bank is financially strong and capitalized. Further, the investigation is based on the internal financial workings of CBA. The objective of this damage is to determine any shortage and is inclusive of assessing if or of not the organizational framework of group, governance, accountability, financial goals and remuneration is contradictory against the compliance results and risk management. CBA has been a point of attraction because of its various scandals regarding the GFC. Recently, it faced money laundering claims, wealth and life insurance scandals. Nonetheless, ARPA announced that the panel would not make any decisions on issues which are present prior to the cited court. Further, the investigation will be general and assess aspects of conflicts of interest (in which the incentives overrule the best interest of consumers). CBA is bearing investigation costs, however they are not likely to be significant regarding the company. Finance experts who believe that CBA is a well-meant organization in its best interest to consumers. On the other hand, the involvement of banking operations with regulators is usually tame and typically engages a polite backwards and forward (Reddy and Wong, 2016). ARPA contains the authority to impose changes. However, weak company culture and authority can be complex to measure and hence, difficult to alter tangibly. Consequently, in accordance with the above discussion ARPA investigation is not significant however there is a rapid increase in regulatory risks at the leading banking companies. An Australian firm of law officially filed a class action lawsuit in opposition to CBA of Australia in lieu of shareholders on Monday, condemning it to fail to reveal the breached rules of anti-money laundering. The lawsuit filed by the firm (Maurice Blackburn) in opposition to the worlds largest lenders is pursued by the federal agency AUSTRAC, which laid blame on it of doing more than 53,000 breaches regarding the rules of anti-money laundering. That resulted in billions of dollars of penalty. The lawsuit, which had been formerly labelled by the law firm and lawsuit financier, stated that shareholders had confronted a considerable share fall on account of AUSTRACs accusations. Maurice Blackburn statement did not mention a number of compensations required. Further, the action provoked CBA shareholder to join from 2015 to 2016. Commonwealth Bank has not discussed that is practised hundreds of thousands of illegal transactions but claimed about the breaches, were mainly held because of software fault and dispute regarding the extent of responsibility. In the annual report, the bank stated that it planned in order to protect itself from the class action lawsuit. The stock of bank faced the loss of approximately 8.5%, as the AUSTRAC declared its lawsuit in opposition to the commonwealth bank. Shares of CBA took a rise by 0.5 percent on next day in line with the broader market (Commonwealth Bank of Australia. Share Price, 2017). Business investors usually gather the useful yet effective information by considering the environmental risks via direct interactions with the executives of company or surrogate engagement firms (Bell, Filatotchev and Aguilera, 2014). Nonetheless, the information is kept private and is not disclosed. Presently, a difficulty arises while considering the environmental commitments, lack of reliable reporting, avoiding inspection by widespread public and comparison amongst peers in the listed companies. For addressing this matter, the task force has been established regarding the climate financial disclosures by the Board of Financial Stability in order to plan the guiding principles for disclosures for managing them according to the climate risks. Universally known CDP3 studies numerous companies yearly, putting questions regarding the framework, action and governance on the environmental changed. Nevertheless, it is restricted by its reliance on the indented participation. During the 2016 assessment of companies internationally, the CDP got only 86 responses from the Australian corporate. Moreover, the reports of CDP at the gross level (nationally or globally), hence restricting the accessibility of information in relation to private corporations. ACSI which stands for Australian Council of Superannuation Investors considers the Australian corporate sustainable reporting practices on a yearly basis. Bollen and et al. assessed that (2015), neither the climate risk is taken into consideration nor the listed private company commitments are compared. In fact, the guide aims at companies to promote disclosure and to notify the expectations of institutional investors in the market. The development of specified companies in dealing with the climate risk offers a helpful strategy to consider the engagement financial activities of investors (Epstein and Buhovac, 2014). Australia has insufficient regulatory guidance and the collapse of institutional investors to wield their impact on corporate (Mgge and Stellinga, 2015). These investors are required to exhibit their engagement in managing carbon relating to their portfolios and must make use of Oxford Martin Principles. First is to adopt and reveal a structure and timeframe for timely engagement with the companies of fossil fuel. Then they are required to take disciplinary measures in opposition to companies that do not comply with the framework, for example, voting not in favour of remuneration reports. Next is to getting rid of those companies which are not able to do progress. It has been assessed that a few company assessed their Energy sector in order to reduce their emission in the long term. Moreover major of the companies do not make submissions to the CDP (Carbon Disclosure Project) and lack of progress. Specified the level by which Australians are bared to fossil fuel corporate by their funds of superannuation, the widespread public has the right to know the exposure of companies to environmental which are managing the same and assessing the actions of these funds to ensure the firms have invested in a diminishing climate changing risks. A stock market is a place where trading of stock is done. From the economic aspect, apart from acting on behalf of a resource of financial investment, the stock market also acts as a function for indicating a mechanism to executives about the decisions on investments as well as a mechanism for company governance. On the other hand, the stock market is well-known for its most useful channel for raising the capital of the company. Individuals are likely to trade in stocks because of its long-term capital and dividend growth and evade against the slow inflation and spending power (Coates IV, 2014). Another aspect that makes the stock market a key attraction is its liquidity. Most of the individuals make an investment in stocks because they are willing to become the owner of the company, by which they can get the benefit when the company makes payment of dividends, or there is an increase in the price of the stock. However, individuals purchase stock with the intention to take control ov er the business. On a regular basis, shareholders are required to have a specific degree of shares to the board for making better decisions and planning directional strategies for the business. The problem with the statement: in the traditional theory of finance, investors are alleged to be reasonable maximizes of finance, following the fundamental rules based on strategies of investment on the assessment of risk-return, since the factors are likely to impact the decisions on investment. Macve, (2014) asserted that the controversial area of this study has diversified finding provided by the analyst. For example, researchers asserted that expected profits, dividends and financial performance of firm are considered as crucial investments for private investors. Sadgrove (2016), determined six factors which are: dividends, speedy growth, an investment meant for the purpose of saving, rapid profits by buying and selling, specialized investment management and continuing growth influencing private investors regarding their investment decisions. Researchers have suggested that investors are required to carefully examine the factors and applying the best of business knowledge while investing on investment. Investors must have potential to understand the economic and industrial signs, as they impact the performance of market share. Hence, they must assess each variable in the climate rather than just assessing single variable. In addition to this, investors must branch out their investments into diversified companies via developing investment portfolio in order to eliminate risk and maximize profits. Many theories related to stakeholders have developed over time identifying and explaining the nature of the interaction between the firm and the stakeholders. Wennersten, Sun and Li, (2015), specifies that the Stakeholder Theory initiated by Freeman was intended to provide an understanding of the unification of various categories of stakeholders. Freeman recognized that any category of stakeholder theory is not complete without the other. Sullivan (2017) , stated that a number of researchers had recognized the need for the unwritten Social Contract which reflects the managerial and normative decision-making related to stakeholder theory that may aid in the analysis of the interaction between firm-stakeholder. The social contract is an implied contract between a company and the related stakeholders. In the twentieth century, moral responsibilities of a company regained philosophical momentum in the form of social contract theory. The social contract of a gas company offers a more inclusive viewpoint on corporate social disclosure by clearly recognizing that all the companies are bound by the social contract; according to which they agree to carry out various activities that are socially desired by the society in return for approving their objectives, which guaranty their successful sustained existence. In this case, the export of gas which may not leave any scope of local consumption may be against the contract. Corpor ate social responsibility involves reporting of the social and environmental variable of the company. The concept was first introduced by MNCs, to recognize their responsibility towards environment and society (Fullan, 2014). Social and Economic Consequences of Accounting Social Contract Recently, many theorists have different perspectives and criticisms of the social contract. In particular, they have argued that the social contract is an incomplete picture of the moral lives. The motivations that could potentially influence managements interaction with stakeholders are offered by these theories that reflect into in the managements decision regarding information to be reported about the activities of the firm activities. The two important economic consequences of social contract are The resources spent on reporting of such kind which is other than the economic goals are a waste of resources because many of the times they are contradictory to a firm's economic and financial goals (Geneva Association, 2014). On the other hand, the proponents of social contract encourage this ides by emphasizing that the reporting of the social contract comes along with certain other social benefits that may outweigh the economic costs associated with its reporting. Thus, engaging in social and environmental responsibility is necessary for business, for the sake of its long-term existence and a better goodwill in the society (Abbott, 2014). The social contract reflects the view that companys moral or regulatory obligations are dependent upon a social contract or agreement executed by them among the society in which they operate. However, the social contract is in the form of a theory which is associated with the contemporary moral and political theory. The social responsibility and economic goal of the company must go simultaneously with each other for better results. The managers in a gas Company could justify the expenses of the social contract to the shareholders not only due to the moral quality of the companys operation but also with reference to the economic benefits achieved by the business in the long run. Similarly, investors will not be concerned about the trade-off between maximum ROI on the one hand, and on the other, the ethical considerations of the company they invest in (Rickards, Wiseman and Kashima, 2014). Wright and Nyberg, (2015) asserted that a financial reporting system that is supported by high-quality standards, strong governance and resonance regulatory frameworks are a key to the growth of any company. Indeed, financial reporting based on high-quality standards of accounting, auditing and ethics strengthen investor trust placed in financial and nonfinancial information. Thus consistent financial reporting standards play a fundamental role in contributing to economic growth and financial stability of any company. As globalization occurs in more and more countries to open their avenues of foreign investment and to expand their business beyond geographical borders, both the public and private sectors have increasingly recognized the benefits of having a financial reporting framework that is commonly understood and supported by strong globally accepted standards (Seto and et.al, 2016). There are many advantages to such reporting frameworks like greater comparability of financial in formation, the greater readiness of investors to invest beyond borders; more efficient method of allocating resources on the basis of international benchmarks. However, achieving an international convergence like this requires more than theoretical support. It requires reaching a consensus as to what international standards should be used which serves as the base for global financial reporting and auditing and also to determine the ways in which the adoption of these standards can be facilitated. The major challenge in this regard is- Understanding the connotation of International Convergence. Conversion of the local standard into international Standards. Complexity in the structure of International Standards (Allen, 2015) Frequency and volume of changes in the International Standards. Potential Knowledge Shortfall. All these major problems have led to an inconsistent IRFS system which has undermined all the benefits associated with a common reporting. The translation of the international standards is a major challenge faced by many countries which leads to inappropriate adoption and implementation of the standards (Siddique, 2015). There are also huge discrepancies in the meaning of adoption. There is no single definition of adoption of standards. The participants of the IFRS are of the viewpoint that the international standards have become longer and much more complex and rules-based. This complex structure of the standards is adversely affecting their adoption and implementation (Aboutorabifard, 2016). Thus for the purpose of promoting consistent reporting framework globally, it is recommended that the setter of international standard become more attuned to the challenges in adopting and implementing the international standards. In particular, the setters must develop standards that are principles-based and not complex, and a flexible structure which lends itself to incorporation and implementation. Positive Accounting Theory (PAT) Positive Accounting Theory is an effort in making better estimations of the real world events and interprets them to accounting transactions. El-Masry and Kamal (2013), asserted this theory is in contrast with the normative theory that only suggests what should be done; the positive theory is based upon explanation and prediction of events. The positive theory covers areas such as which accounting policy will the firm choosegiven the problem and variables. It also measures firms reaction to the newly proposed accounting standards. The overall purpose of this theory is to recognize and predict the choice of accounting policies available with firms (Iatridis and Schroeder, 2016). It also recognizes the economic consequences which exist in relation to every accounting policy. With the help of PAT, firms maximize their survival prospects, so they can organize themselves proficiently. In relation to PAT, the firms aim at minimizing their contract costs like negotiation, renegotiation, and monitoring. The firm tends to choose the accounting policies that are best suited to their needs. PAT recognizes the changing situation that requires managers to apply a flexible approach in choosing accounting policies (Dodge and Akbari, 2017). This highlights the problem of opportunistic behaviour. This happens when the management actions are in their own personal interests. Thus, positive accounting theory reflects the best set of accounting policies which are an optimal compromise between minimizing contract costs and providing flexibility. Another relevant accounting theory is Normative accounting theory which provides guidance relating to the manner of selecting the most appropriate accounting procedure and prescribe what should be done (Elijido-Ten and Tjan, 2014). As per normative theory the ratio of debt to total tangible assets should be below the specified limit, and in case the quantum of debt exceeds either the assets inflates or liabilities decrease. In case contractual safeguards are not provided then it is assumed that the holders of debt will have to pay the higher cost of interest for compensating towards higher risk. Thus, this theory assists in ascertaining the appropriate procedure in order to reduce the amount of risk and loss relating to debt component. A distinguishing feature has been assessed by the authors to assess the manner in which political and legal setting influences the shape of regulatory space relating to the development of the standard. Jacobsen, (2013) stated that the reason behind the same is that role of political factors in standard-setting is most sophisticated. The influence of political factors on setting standard can be said as an objected intervention in the standard-development process by an economic entity with the aim of influencing the outcome of the procedure in order to enhance the entity economic value, eliminate accounting alternative in order to decrease the impact of additional flexibility provided through same. Conceptual framework provides assistance to AASB for developing and evaluating the accounting standard (Klettner, Clarke and Boersma, 2014). AASB is responsible for the development of Australian Accounting Standard, and the same is necessarily required to be applied by entities in the preparation of financial reports. The conceptual framework can be specified as a practical tool with an assist in developing consistent accounting policies in the case when no accounting standard applies to particular transaction or event (Bodie, 2013). Even assistance is provided in the case when a standard allows a choice of accounting policy and also in interpreting the standard. Thus, it can be concluded that conceptual framework helps in developing and modification of standard as they assist in interpreting the same in an appropriate manner. Through same, the need for modification or necessity of new accounting standard is ascertained, and the manner in which same should be applied is also ascertai ned. The main objective of the conceptual framework is to enhance the financial reporting for providing a clearer and update set of concepts. References Abbott, K.W., 2014. Strengthening the transnational regime complex for climate change.Transnational Environmental Law,3(1), pp.57-88. Aboutorabifard, H., 2016.Equator Principles and Climate Change Issues: Examining the EPs Climate Change Policies and Analyzing the Likely Effectiveness of these Policies(Master's thesis, University of Waterloo). 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