Voluntary Reporting: The Case of Imperial Tobacco - Essay Example

? VOLUNTARY REPORTING: THE CASE OF IMPERIAL TOBACCO By: Presented Introduction Many companies and organizations have adopted the system of offering other voluntary information on top of the usual information that is required by accounting principles (Tian & Chen, 2009). Such information includes social responsibility practices, stock price information and company characteristics (Binh, 2012; Campbell & Slack, 2008). This paper covers an evaluation of Imperial Tobacco’s policy on disclosure of information on corporate responsibility during the release of the company’s annual financial statements. The paper takes into account the quality of voluntary narrative disclosure, evaluates the overall presentation of the report and the impact of reporting corporate responsibility matters on the information received by users regarding corporate performance of Imperial Tobacco. Finally, an evaluation of the IIRC agenda upon the quality of financial information coupled with the role of the accountant in safeguarding this agenda is undertaken. Viewing from the development of information disclosure system, voluntary disclosure appears after compulsory information disclosure (Tian & Chen, 2009). Specifically, the paper addresses the use of voluntary reporting on the Annual General Meeting notice. Quality of Voluntary Narrative Disclosure at Imperial Tobacco: Imperial Tobacco has made bold steps in ensuring that it integrates corporate responsibility into its ordinary financial operations. The firm understands that it has social and economic roles to play in order to safeguard positive gains already made by other players in society. The issues that ITG generally endeavors to engage in at various levels, according to the 2012 financial reports include: 1) Tackling child labour, The company understands the temptation that comes with the expectation for higher returns and it has undertaken to fight the vice of child labour at all levels of production. As a result, we joined the movement “Eliminating Child Labour in Tobacco Foundation” where ITG is a board member. 2) Consumer support: Various municipalities have lately come up with extremely exaggerated laws in the company’s view not only undermine free trade in tobacco products, but also limit the rights of the consumer to the extent they are prevented from freely enjoying their freedom at using tobacco products. 3) Response to environmental challenges: Among the most common environmental challenges associated with tobacco use is emission of carbon dioxide. The company has lately adopted latest technology in cigarette manufacturing and as a result the products have seen a 4% reduction in carbon dioxide emission, as research into how to reduce this rate further continues. Furthermore, the company has reduced energy consumption by 5%. 4) Fighting illicit trade: The sale of counterfeit products bearing the company’s name is seen as a major blow to the trust bestowed upon the company by consumers of its products, and therefore the company has made bold steps in ensuring that this vice dies completely. The company has employed personnel in various major shipping centers to track any suspicious trade in ITG’s products while working closely with local authorities. 5) Job creation: Being a multi-national, ITG Plc has directly and indirectly employed thousands of persons who are instrumental in the company’s daily operations while scooping their living out of the mutual relationship thus established. 6) Issuance of dividends Each financial year, the company establishes a certain amount of returns per share owned by shareholders and disperse the same to the esteemed shareholders who gladly get returns for their trust in the company and their choice to invest in Imperial Tobacco. The 2012 annual report surpassed all other reports given earlier, especially due to the attempt to indicate corresponding figures alongside the activities. The ratios relating to various aspects of the report are easy to work out, since all the required figures are supplied. The notice of the annual general meeting had sixteen ordinary resolutions to settle by vote. The Annual General Meeting Notice: In the AGM notice of 2012, matters pertaining the conduct of shares were listed under special resolutions, while matters to do with the development of political contacts were listed under ordinary vote. The notice further indicates that neither the company nor any of its subsidiaries has any intentions of donating funds to any political formations for the incoming financial period. The company will only fund political activity to the tune of 100,000 British Pounds. However, this amount can only be dispatched after a successful passage of such a resolution at the preceding AGM. The requisite provisions of the company further stipulate that the management can only be allowed to donate such funds to political parties in the event the candidates or political formations show clear intent to represent and articulate an issue of primary importance to the firm. To evaluate the quality of this report, a trace of the guiding figures where cited is very essential. The number of employees is listed, the amount of tax given to governments in countries of operation are the amount invested in fighting illicit trade in Imperial Tobacco’s products are listed and this gives a good impression of the priorities of the IT management. From the available information, it is obvious that illicit trade has been a great threat to the goals of the company and the most investment has been made here. This is evidently much more than the amount of tax levied by different governments, which shows a tendency to place the interest of the company before any other obligations. It would be of great value if the company tried to attach relevant figures used in combating child labour in the tobacco industry and the amount used to support consumers so that they get the liberty they require to use the company’s products. Political funding: Funding political campaigns including referendums and other political activities is clearly defined in the AGM notice of 2012. Under this notice, the situations under which the company may engage in such direct or indirect funding are defined both by the motive and total investment in such activities, not to mention the mandatory passage of such a resolution during the previous AGM. Evaluation of the Presentation of the 2012 Annual Report: Chatterjee et al (2010) noted that previous studies had indicated insufficient information was usually provided by major firms in their periodic financial statements. This trend obscures the possibility for a deep analysis of the firm’s proceedings (Deloitte, 2009; Beattie & Pratt 2002). This report evaluates the 2012 financial statements of the company in light of such possibilities, and gives a recommendation on Imperial Tobacco Group’s performance on an index based on willful disclosure of helpful information. The company has adopted a very clear way of summarizing its returns, including individual files for each statement, to draw a clear picture of its performance. For example the actual returns as percentages and the results are well described using simple charts in the file containing the overall performance results. This allows for a quick check of the performance of the company. Furthermore, the company’s main annual points of reference to shareholders are listed individually, which makes it easier to access the information and portray a high degree of transparency. For this reason the interested parties, including shareholders, investors, the government agencies and the management have their task simplified when they want to trace the result of an individual sector to the detailed calculations of the same. The adjusted earnings per share are shown to have maintained an upward trend over the last three years, which is an encouraging note for interested persons. If the trend remains, which is possible in the short run owing to the quality of the balance sheet, the firm will be able to pay higher dividends to its shareholders in future. The adjusted operating profit has also gone up by 4% during the 2012 financial period, which again offers abundant hope for continued growth of the firm. The reports for the year indicate a high degree of willingness by the management to lay transparent its activities, as well as portray the company in a positive light to the interested parties. This is evident in the simple and clear manner that the reports are given. To that end it is not easy to point out evident weaknesses in the firm’s structure. The revised disclosure structure is aimed at simplifying and streamlining the requirements by removing duplication and, where necessary, clarifying existing provisions (Jackson, 2011; Chatterjee et al, 2010). The financial statements of the company are all up to date and organized in relation to the previous year. This offers direct comparison between the performance indices of the two periods, therefore providing a quick preview of the current year’s trend. Impact of the IIRC Agenda and the Role of Accounting Profession in Safeguarding this Agenda: Campbell & Slack (2008) mention some of the agenda by the International Integrated Reporting Council (IIRC) as provision of clear guidelines on the way companies report their periodic performance index. The IIRC asserts that Integrated Reporting brings together material information about an organization’s strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which it operates (2011; 1-3). Integrated reporting involves quoting such matters as governance, monitoring, attitude to work and incentives to employees, coupled with their remuneration, and the firm’s management attitude to risk. As per the IIRC guidelines, every change in the above aspects should be noted accordingly in the firm’s oncoming financial reports as an indication of the firm’s continued performance (Deloitte, 2009; Sarkar, 2011). The accountant is a central figure in ensuring that these guidelines are effected at their station, so that they can keep their firm abreast with growing technology. The general presentation of Imperial Tobacco Group’s annual report is clearly geared towards compliance with the IIRC guidelines. The information provided covers matters on strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context within which ITG Plc operates. The AGM notice is also clearly outlined in line with the IIRC requirements. The level of communication complies with the IIRC stipulation that the report communicates the organization’s strategy, business model, performance and plans against the background of the context in which it operates. This is easily derived from the agenda outlined in the notice, from proposals for election of board members and company executives. Among other things, in the AGM notice, the issuance of dividends is emphasized and all the previous year’s dividend issues discussed in comparison with the expected share value for the current financial period. The criteria for recognition as a qualified voter during the meeting is also defined as well as appointment of representatives for corporations considered part of the company’s stakeholders. The accounting department is directly tasked with the role of ensuring that the corporation adheres to the latest guidelines provided by the IIRC. Such guidelines require modest introduction and the management needs to be well informed of latest developments so that there may not occur collision of interest among the different levels of staff. Bibliography Beattie, V., McInnes, W. & Fearnley, S., 2004. 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