Latest effort at transparency just muddies water by Carolyn Pugsley and Alexandra Module - Research Paper Example

?Accounting Theory Research Assignment Table of Contents Table of Contents 2 Article One 3 Summary (Part A) 3 Accounting Theory (Part B) 3 Analysis (Part C) 4 Conclusion 5 Article Two 5 Summary (Part A) 5 Accounting Theory (Part B) 6 Analysis (Part C) 6 Conclusion 7 Article Three 8 Summary (Part A) 8 Accounting Theory (Part B) 8 Analysis (Part C) 10 Conclusion 11 References 12 Article One Summary (Part A) The name of the article is ‘Latest effort at transparency just muddies water’ which was published in the year 2012 in The Australian. The article is written by Carolyn Pugsley and Alexandra Module. The main objective of the article is to state the reforms which are adopted by the federal government of Australia in order to disclose the remunerations of seniors executives of companies. This reform has been adopted by the Australian government with the intention of facilitating better transparency for shareholders with respect to the remuneration structures of senior executives. Moreover, this reform will facilitate management of companies with minimum regulatory pressure (Pugsley & Module, 2012). Accounting Theory (Part B) The appropriate theory for this article will be ‘Legitimacy Theory’. This theory states that the remuneration policy of an organisation is conducted in a legitimated manner in accordance with it the board of directors (BOD) of the organisation is required to justify that the remuneration policy adopted by them are according to the company law and Accounting Standards of Australia. Moreover, the remuneration of BOD of organisations should be justified to the shareholders as well as society. The remuneration policy of senior executives is required to be revealed in order to ascertain that remunerations are provided in keeping with best practices under the code of corporate governance (AFAANZ, 2010). Analysis (Part C) The legitimacy theory signifies that the remuneration policy adopted by companies is in adherence with rules as well as regulations of the government. This theory also states that the financial and annual reports which are prepared by companies are in accordance with accounting standards and company law. In this similar context, the article depicts that the remuneration policy of senior executives will aid in determining that the remunerations as well as rewards which are acquired by senior executives are according to accounting standards. The theory signifies that the remuneration of senior executives should be revealed in an appropriate manner in annual reports with the motive of depicting the performance of companies to stakeholders. Moreover, the theory assists in minimising pressure on the management as the audit committee is familiar with the regulations of remuneration policy. The article depicts that the amount of remuneration of the senior executives should be revealed in the financial statements or annual reports of companies which will signify the performance of companies among stakeholders and market segments. Companies are required to adopt appropriate remuneration policies which will be legally enacted. The article also reveals that the remunerations of the senior executive should be disclosed in order to ascertain transparency towards shareholders. Moreover, the disclosure of the remuneration policy will assist companies in better regulatory operations (Crombie, 2010). It has been observed from the article that the government of Australia has formulated policy with regard to the disclosure of remunerations of senior executive. The policy devised by the government is perceived to be complex for auditors as the remuneration report will comprise three segments which include ‘past pay’, ‘present pay’ as well as ‘future pay’. Furthermore, annual reports of companies with excess or decreased incentives and remunerations will portray ineffective performance of companies. Companies should adopt an effective policy of representing remuneration of senior executive which can be linked with the companies’ performances. In this regard, companies should acquire a principles-based approach for better representation of annual reports from the perspective of investors as well as company. The theory states that companies should adopt an appropriate remuneration policy in a legal manner (Crombie, 2010). Conclusion The article states the importance of disclosing the remuneration of senior executives in the financial statements or annual reports with the objective of depicting the performance of companies to stakeholders. The notion of this article is recognised to be related to legitimacy theory which denotes that remuneration of senior executive should be represented in accordance with legal standards and laws. Article Two Summary (Part A) The article ‘Directors liabilities cloud reporting scheme’ is written by Damon Kitney. The article was published in the year 2012 in the Australian. The main objective of the article is to determine the strategy with the assistance of which the directors of companies will be able to communicate with investors in an efficient manner. In this regard, directors of companies are required to formulate or devise a global reporting system such as ‘International Integrated Reporting Council’ (IIRC) for proving improved quality of information on a global context. This information system will assist companies in providing valuable facts relating to governance, strategy and performance of the organisations (Kitney, 2012). Accounting Theory (Part B) This article is recognised to be related to the accounting theory i.e. stakeholder theory. This theory states that organisations are required to be concerned about groups as well as individuals who are to be affected by the decisions, activities and accomplishments of the goals of an organisation. Organisations are perceived to be responsible to their stakeholders and not just merely to shareholders for the activities conducted to achieve organisation purposes. The stakeholder theory determines the relationship between stakeholders and organisations. In this regard, the theory mainly emphasizes on identifying the influences of stakeholders on the actions of organisations (Kaur & Lodhia, 2011). Analysis (Part C) The concept of the stakeholder theory is to provide valuable information to local as well as global stakeholders about the performance of organisations performing operations worldwide. The notion of the article is to provide superior information to investors on a global context which is recognised to be identical with this theory. Moreover, the article is related to the development of IIRC. Integrated Reporting (IR) is devised with the intention of communicating to investors on a global context about the strategies, performances and governance which are adopted by organisations for accomplishing short as well as long-term goals and in meeting the requirements of investors. The article also states that the main objective of IR is to provide important information to investors with respect to their investments. In the similar perspective, the theory implies that stakeholders of companies are required to be reported about the operations and accomplishment of organisational goals. Organisations are also required to recognise the needs and the expectations of stakeholders for enhanced performance of organisations (Tilt, 2009). Furthermore, the article states that the directors of companies should be least worried about the increased liability related to the formulation of global reporting system for investors to be communicated with valuable information with regard to the operations of companies. In this context, the theory indicates that stakeholders are recognised to be important elements for the performance of business organisations. Therefore, business organisations are required to emphasise on the requirements of stakeholders as compared to shareholders. It can be comprehended that the stakeholder theory is an important aspect for the sustainable growth as well as development of a company in the global arena. Additionally, this theory ensures that stakeholders are communicated effectively with the motive of ascertaining that their expectations are upheld efficiently for better performance of organisations in future. According to the article, IR is adopted in Australia with the objective of reporting to stakeholders about the activities conducted for better future performance. All these aforementioned discussions signify that the idea presented in the article are interrelated with the stakeholder theory (Kaur & Lodhia, 2011). Conclusion The article states the importance of IR in providing superior information to investors both at local as well as international levels about the performance of organisations. The thesis of the article is observed to be aligned with the stakeholder theory which signifies that stakeholders are important individuals for the enhanced performance of organisations. Article Three Summary (Part A) The article ‘Only ‘fabulously wealthy’ should fear superannuation changes’ was published in The Australian in the year 2013, written by AAP. The main purpose of the article is to bring out the facts in relation to the tax structures on superannuation which are to be implemented by the government of Australia. The government is observed to be planning taxing policy with the intention of charging more tax on wealthy people as compared to ordinary individuals. In this respect, the people who earn more than necessary are required to be taxed additionally on the superannuation more and above 15%. On the other hand, the ordinary people should be taxed at the ordinary and predetermined rates (AAP, 2013). Accounting Theory (Part B) The accounting theory which will be utilised in the analysis of this article will be ‘Political Cost Hypothesis’. This theory is observed to be related with the considered article. The theory states that large organisations or companies which are earning huge profits are observed to be using certain accounting methods or are involved with social development campaigns with the intention of minimising government attraction. Moreover, the theory also signifies that large organisations adopt these strategies in order to avoid transfer of firms’ wealth to government funds. All these aspects are perceived to be facilitating management as well as shareholders of companies with better capital (White, 2006). Analysis (Part C) The article is related to the tax structure which is required to be imposed on the richer or super funded people. The rich people of Australia are conceived to be acquiring better tax benefits or concession by allocating their funds towards the savings of retirement plans. The theory possesses a similar notion with the article as the theory implies that large business organisations earning immense profits are observed to be involved with social development programs or acquire other accounting methods for minimising greater impose of taxes on their profits. This depicts that the concept of the article and theory are interlinked (Gaffikin, 2007). Furthermore, the article states that the rich people in Australia will be taxed at a higher rate as compared to ordinary people who will be taxed at ordinary rates which are charged earlier. According to the article, the government of Australia has planned on imposing more or additional taxes on the rich people with the motive of assisting students, part time workers, women and young people among others with financial support for better future growth. These tax structures will facilitate in the equitable distribution of income and superannuation benefits. In this regard, the ‘political cost hypothesis’ indicates that imposing more tax on larger firms with huge profits will increase the income of the government. Moreover, government with these earnings will be able to provide financial assistance to smaller firms and towards the development of society as well as economy. In this respect, it can be comprehend that the ideas which are acquired from the article are related to the tax structure of the Australian government which is observed to be benefitting rich people while affecting the ordinary people. The theory is recognised to be appropriate for this article as the government is identified to determine revised tax to be imposed on rich people in relation to superannuation in the next budget (Gaffikin, 2007). Conclusion The article states that the tax structure of the government of Australia is required to be revised and new taxes on the rich people is needed to be imposed for equitable distribution of income as well as for assisting ordinary people. The ‘Political Cost Hypothesis’ is observed to be related with this article as more taxes are required to be imposed on large organisations which are earning huge profits. References AAP, 2013. Only 'Fabulously Wealthy' Should Fear Superannuation Changes. National Affairs. [Online] Available at: http://www.theaustralian.com.au/national-affairs/only-fabulously-wealthy-should-fear-superannuation-changes/story-fn59niix-1226609774940 [Accessed April 07, 2013]. AFAANZ, 2010. Remuneration Logics: How Large U.S. Firms Justify CEO Pay. Modules. [Online] Available at: http://www.afaanz.org/openconf/2010/modules/request.php?module=oc_program&action=view.php&id=352 [Accessed April 07, 2013]. Crombie, N., 2010. Institutionalising the Discourse of Executive Remuneration: An Analysis of Corporate Governance Codes and Annual Reports from Australia, New Zealand and the United Kingdom. Introduction. [Online] Available at: http://ir.canterbury.ac.nz/bitstream/10092/3587/2/12615338_Crombie-ExecutiveRemuneration.pdf [Accessed April 07, 2013]. Gaffikin, M., 2007. Accounting Research and Theory: The Age of Neo-empiricism. Australasian Accounting Business and Finance Journal, Vol. 1, Iss. 1, pp. 1-19. Kaur, A. & Lodhia, S. K., 2011. The State of Disclosures on Stakeholder Engagement in Sustainability Reporting in Australian Local Councils. Assets. [Online] Available at: http://www.utas.edu.au/__data/assets/pdf_file/0005/188438/Kaur_Lodhia.pdf [Accessed April 07, 2013]. Kitney, D., 2012. Director Liabilities Cloud Reporting Scheme. Business. [Online] Available at: http://www.theaustralian.com.au/business/companies/director-liabilities-cloud-reporting-scheme/story-fn91v9q3-1226530046754 [Accessed April 07, 2013]. Pugsley, C. & Module, A., 2012. Latest Effort at Transparency Just Muddies Waters. Business. [Online] Available at: http://www.theaustralian.com.au/business/opinion/latest-effort-at-transparency-just-muddies-waters/story-e6frg9if-1226540691623 [Accessed April 07, 2013]. Tilt, C. A., 2009. Corporate Responsibility, Accounting and Accountants. Chapter 1, pp. 11-32. White, G., 2006. The Analysis and Use of Financial Statements. John Wiley & Sons. Read More