- 10/17/2010
ACCG224 Week 10
Semester 2, 2010
CSR Reporting and Non-Financial
Measurement
Presented by;
Sunil Dahanayake
Rajni Mala
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Learning Objectives
Current factors influencing accounting and
auditing research, regulation and practice
Issue surrounding the application of fair value
accounting during the global financial crisis
Possible directions in future international
accounting standard setting arrangements
Sustainability accounting, reporting and assurance
Other non-financial accounting and reporting
issues.
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Major Topics Discussed
Extensible Business Reporting Language (XBRL).
The effects of corporate collapses and the Sarbanes-Oxley
Act (2002)
Issues Surrounding the Application of Fair Value
the Application of Fair Val
Accounting during the Global Financial Crisis
IASB and FASB convergence project
Sustainability Accounting and Assurance
Water Accounting
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XBRL
XBRL = Extensible business reporting language
Allows financial information to be presented in an
interactive way that in turn allows individual items
of data to be extracted by software to produce
reports custom designed by individual users
SEC (2008)
500 of largest US companies
2009 financial reports
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XBRL
XBRL will loosen the control managers currently
have on data aggregation decisions and place their
performance under greater scrutiny
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Discussion Questions-End of Chapter
Questions 1.
What is XBRL ?
What are the arguments for and against
disaggregation of data in financial statements?
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The effects of corporate collapses and
Sarbanes-Oxley Act (2002)
High profile collapses in early 2000s changed the
image of accounting and auditing and its
regulatory environment
Criticism of auditor independence and corporate
governance
SOX
peer reviews replaced by PCAOB inspections
restrictions on provision of non-audit services by audit
firms to their audit clients
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Discussion Questions
What are the examples on high profile corporate
Collapses?
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Issues surrounding the application of fair
value accounting during the global
financial crisis
Some believe the practice of fair valuing assets was
contributing factor
it requires the write-down in the value of some assets
when markets are turbulent
when markets are turbulent
marking financial assets to market
Considerable dispute about this
SEC investigation (2008)
recommendations offered for improving fair value
accounting
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Is the criticism leveled at fair value
measurement fair?
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Reactions by standard setters
IASB (October, 2008) changed rules so that
losses from changes in market values of
financial assets could be reclassified under
certain circumstances avoiding charging
mark-to-market losses to the income
statement
FASB (2009) introduced a ruling to allow
banks to use their own judgement in
determining the fair value of assets, rather
than using markets
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Auditors and the global
crisis
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financial
The GFC could lead to regulatory action
affecting auditors
relatively little attention paid to the auditors role in
th
the crisis
the accounting profession and regulators have
proactively issued guidance
auditors of banks later suffering financial
difficulties can expect to come under scrutiny
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Discussion Questions- Q. 6
Leon Getter wrote in a recent article:
As former analyst Henry Blodget points out, the US is adopting the model used by
Japan in the 1990s when it refused to acknowledge its banks were insolvent and
pretended they were healthy. History, as Mark Twain said, does not repeat itself,
but it rhymes.
The G20, banks and standard setters should remember this: to borrow from
G20
thi
Winston Churchills line on democracy, fair value is the worst form of accounting
except for all the other forms that have been tried.
(Getter, L. Standard-setters rendered toothless by G20, Age The BusinessDay,
(April 15, 2009), p. 14.)
Does fair value convey reality better than any other form of valuation?
Is it better for banks to report stable asset values or to provide information about
those assets? What are the arguments for each view?
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IASB and FASB convergence
project
2002 and 2006 convergence agreements
SEC issued (2008) a roadmap for the use of
IFRS by US companies by 2014
markets becoming increasingly global
new investment opportunities to US investors
would make firms from different countries easier to
compare
progress toward 7 milestones to be assessed in
2011
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Issues in IFRS-US GAAP
convergence
It is not certain that the US will adopt IFRS
Some argue that competition between
standard setters is desirable
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Discussion Question- Question 7
What are the arguments for and against
convergence between the FASB and IASB ?
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International auditing standards
Auditing standards are also being
internationalised
have been redrafted
growing international acceptance
A move to IFRS would require US auditing
standards to change from assessing conformity
with rules to assessing true and fair
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International auditing standards
Both the auditing and accounting standards
boards must deal with issues relating to their
independence and governance before both
sets of standards are truly global
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Discussion Question- Question 8
Is it important to harmonise both accounting and
auditing standards around the world ? Why ?
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Sustainability accounting, reporting and
assurance
Companies are issuing sustainability reports
Sustainability accounting is a subset of social
accounting
Sustainability can be regarded as meeting the
needs of the present without compromising
the ability of future generations to meet their
own needs
environmental protection
justice between peoples and generations
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Recent developments in sustainability
reporting
Global reporting initiative (2006)
Accounting for carbon emissions
Sustainability reports are increasingly being
either audited or reviewed by independent
auditors
companies with the most to gain from increasing
the credibility of their reports are more likely to
seek assurance
little authoritative guidance
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Trends in sustainability reporting
Some companies are now seeking assurance
for their sustainability reports
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Discussion Question- Question 9
What is sustainability reporting? How does
sustainability reporting relate to social
accounting ?
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Other non-financial accounting and
reporting issues
Water accounting applies accrual accounting
concepts to water resources
Greenhouse gas emission accounting
Both attempt to provide data on scarce resources
other than those traditionally captured by financial
accounting systems
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Discussion Question- Question 15
What is Global Reporting Initiative ? Is this the
same as the Greenhouse Gas Protocol Initiative ?
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Discussion Question- Question 16
What is water accounting ? Why would we want
to account for water ?
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Discussion Question- Question 18.
What attributes of water could be measured?
Who would use information about these water
attributes?
What decisions would they be making?
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Summary
One of the major influences on accounting
and auditing practice and research is the
growing internationalisation of accounting and
auditing standards
diti
There have been recent developments in
sustainability reporting and assurance
Water accounting and greenhouse gas
emission accounting are new developments
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Key terms and concepts
XBRL
Sarbanes-Oxley Act 2002
Fair value accounting and the GFC
Auditors and the GFC
and the GFC
Convergence project
Sustainability accounting and assurance
Water accounting
Greenhouse gas emission accounting
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Questions Please ?
Questions ?
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