Reporting and Disclosure

Read the disclosure statement found below or on the Foundations website carefully and answer the questions below. You will need a calculator to complete the activity. Upload your answers to Black Board.

The Triple Bottom Line (TBL) accounting concept and framework was first created by John Elkington in the mid 1990’s, and has since changed the way for-profit, non-profit and government agencies measure the sustainability of their initiatives and company. The TBL framework is flexible and can be adopted and molded based on the specific needs of an organization. The framework is comprised of three parts, which are: social (People), environmental (Planet), and financial (Profit), commonly referred to as 3Ps. This framework does spark debate regarding the ethical problems behind measuring, quantifying and accounting for social and environmental variables, which is often not supported by many

In October 3, 2014 the Financial Accounting Standard Board (FASB) issued proposed updates to the disclosure framework for the board decision process. This disclosure framework is meant to improve the effectiveness of disclosures in notes to financial statements. According to the disclosure framework effectiveness of the financial statements could be achieved by enhancing clarity in communication of information that is most important to users of each entity financial statements. FASB agrees that reduction in volume of the notes to financial statement is note the main objective but also does not refute the fact that concentration on the most important information in note will automatically lead to reduction in the volume of notes to financial statements (Financial Accounting Standards Board, 2014).

Additionally Savin-Williams (2001) stated, Youths do not usually come out to their father because they do not feel close to him and they fear his negative reactions. The feeling that the present time is not the right developmental time in their relationship with their father to come out is another reason that youths have for withholding information. The sons often feel that they do not have a loving and supportive father. They long for intimacy and are saddened that they lack it. The fathers probably are simply clueless or unable to provide intimacy. The belief that the present is not the most opportune time to disclose is often rooted in the trepidation that the development of the gay child’s relationship with his father will be negatively affected by the disclosure. Issues of moral condemnation and eternal

-Investors are concerned with the reliability and comparability of sinacial statement in countries other than theirs. They favor this because it will help lower cost of investing in countries aboard and enhance the effectiveness

Less profitable firms or high debt firms could use SER disclosures to legitimise activities to lenders and shareholders (Haniffa and Cooke 2005). SERs can be used by managers to frame how Financial stake holders interpret financial information, specifically to manipulate stakeholders reaction to disappointing financial reports, by changing the focus and constructing a "disconfirmatory effect on the financial figures" (Neu et al., 1998, p.270). Qualitative positive disclosures with quantitative negative disclosures (Gibbins et al., 1990) can be used as a method to down play managerial incompetence and persuade financial stakeholders to excuse past mistakes by using their ethical or socially responsible displays to compensate. This is a contrasting view to legitimacy theory which emphasizes an organisations need for actions to be perceived by stakeholders as legitimate (Deegan and Unerman, 2011). In this instance, SERs are used as a method to manage a situation when the expectations of stakeholders are not met. When an organisation fails to be perceived as legitimate, they use SERs to demonstrate that it can only improve upon its past actions and regain legitimacy.

Financially transparent by definition, public corporations accompany easy access to a myriad of financial reporting required by the United States Securities and Exchange Commission (SEC).

Companies use accounting policies while preparing their financial statements. All financial statements are set to follow an international standard guideline. These policies are available to users of financial statements while making financial decisions in order to make sure that the proper decisions are being made. According to The Financial reporting and analysis article by Gibson, the full disclosure principle states that a company’s financial statements should include all the information needed in order for the reader to fully understand statements (Gibson, 2012). Disclosures not only provide extensive information to users but also monitor the preparation of financial statements to guarantee that it is free from any misleading policies that might have been used by management while preparing financial statements. Some of the requirements by the disclosure when preparing financial statements are reporting all transactions and trades that occurred during the period that the financial statements are covering are actually reflected on the financial statements. This includes any errors that might have caused any false calculations should also be reported on the financial statements. In addition to that, footnotes should be provided along with the financial statements to support and better explain financial reporting (Prentzas, 2012).

The KPMG International Survey provides data that indicates that sustainability reporting is going mainstream, found that among the world’s largest 250 companies, the CSR reporting rate is more or less stable at 93% (KPMG, 2013). Companies must rise to the demands for disclosure and transparency by publishing sustainability reports, but sometimes the report alone is not enough to satisfy stakeholders and that is why many companies also attach an assurance statement. Assurance statements are issued by a third-party, such as Ernst & Young or KPMG, which validates, gives creditability and reliability of the information provided in the company’s reports with regards to their sustainability practices to external stakeholders. The practice of an assurance statement in sustainability reports serves as a communication mechanism as it arguably enhances the clarity and reliability of these statements (Deegan, Cooper and Shelly, 2006).

A triple bottom line model never merely quantifies an accomplishment or rather the wellbeing of a company through its conventional monetary bottom line. However, it similarly measures social, ethical as well as environment performance of the company. Triple bottom line typically is an incessant process that shall assist the company in concentrating into the performance of a more sustainable business whereas demonstrating to local communities together with employees of that particular firm that it is not merely looking forward on profit making, but similarly a greater common good for the company operations (Hitchcock and Willard, 2009).

Elsewhere, the introduction of the new IR framework by the IIRC (International Integrated Reporting Council) has been suggested to be a paradigm shift in the way corporations report their activities to stakeholders (Klettner, Clarke & Boersma 2014; Soderstrom 2013). Until now, business reports primarily focused on TBL (Triple-Bottom Line) reporting of economic, social and environmental impacts (Adams 2013). While some corporations have demonstrated a willingness to achieve higher standards of performance in corporate sustainability in line with international frameworks (such as the GRI), rarely do they produce reports which provide information on social and environmental issues to the same extent and quality as that of financial information (Boersma 2013;

Improvements in reliability of corporate revelation minimize the threat that an investor or a creditor will make poor decision if the information which is provided to them is inaccurate. The threat that is mentioned above is the information risk, that is present everytime creditors or investors use information to assess economic risk of any potential investments. The better the quality of the information, the better chances these users making the right decisions. It means the information risk is lower (Elliott and Jacobson, 1998).

Thirdly, the principle demand investment institutions to disclose the information of environmental, social and governance issues appropriately. The company is required to provide standardised reporting on these issues, Meanwhile, merge ESG issues into annual financial reports. Moreover, the company should provide information relating to adoption of relevant standards or codes of conduct. To disclose ESG issue on reports could prevent some companies from doing some harmful investments to the ESG issues for the purpose of making profits. Lunar Capital Management do have the RI Transparency Report to disclose the relevant aspects about the company and ESG issues. In addition, it also has appropriate financial reports for all portfolio firms to increase the transparency, such as weekly KPI reports.

‘’The internationalisation of capital and product markets, advances in information technology, the increasing complexity of financial products and changes to international financial reporting standards all have the potential to fundamentally alter the information sources used by capital providers and the ways in which they are used. (Stefano , et al., 2013)’’.

During a lecture in International Sustainable Tourism, we discussed the Triple Bottom Line or Triple Bottom Line Reporting, which means expanding the traditional reporting framework to take into account environmental and social performance in addition to financial performance. This framework is becoming an accepted approach for organizations to demonstrate they have strategies for Sustainable Growth. It focuses on decision-making and reporting, which explicitly considers an organization’s economic, environmental and social performance. Triple Bottom Line focuses on Stakeholders instead of Shareholders. A Stakeholder is a person, group, or organization who has an interest or concern in an organization. In this essay, I