Environmental Accounting in United Arab Emirates - Assignment Example

Environmental accounting in United Arab Emirates Introduction Environmental accounting is part of non financial disclosure aligned to best practice in corporate governance. This practice involves recognition and disclosure of corporate environmental cost and liabilities in financial and annual reports. Business entities have a social responsibility to protect the environment which may not necessarily translate to legislative requirements but earn the corporation good reputation among in the community (Farouk, Cherian &Jacob 2012, p.1-8). This is of significance especially when the company intends to attract new investors and retain shareholders through confirming confidence in its stability and transparent management practice. Globally several federal regulations exist targeting to improve practice of environmental accounting and disclosure of vital information among the business community. These include i. The comprehensive environmental response, compensation and liability Act (CERCLA) 1980 which requires corporate dealing with potentially harmful substances to incur the cost of remediation. ii. Resource conservation and recovery Act(RCRA) 1976 which establishes responsibility for monitoring, transportations, treatment, storage and disposal of potentially hazardous substances iii. The clean air Act 1990 which seeks to reduce the amount of harmful gaseous emissions disposed by corporations (Farouk, Cherian &Jacob 2012, p.1-8) Besides these several other environmental regulations have been developed especially with emerging concern of environmental cost of manufacturing. While in some regions, these are compulsory requirement the AUE region lags behind in implementation. Being a developing market the region is at the initial stage of implementing good corporate governance practice among stakeholders with voluntary disclosure being embraced by companies that seek to impress investors and shareholders. This report focus on the environmental accounting issues and legal frame work for environmental protection provided for in the UAE. The paper will also discuss on the implementation of the disclosure practices in the emerging markets in UAE. The information applied has been collected form secondary sources limited to current practice level and improvement as suggested by regulations. Environmental accounting Effective accounting ensures a reliable flow of transparent, comparable and consistent information about the environmental cost. Within the AUE compliance to financial disclosure is regarded as a requirement hence majority of organization provide financial accounting report. Lack of regulation demanding non financial reporting allows management and boards to release information at their discretion. Environmental accounting refers to the process of identifying and creating awareness regarding cost related to maintaining a sustainable ecosystem which in turn helps in identifying techniques to reduce such cost. (Farouk, Cherian &Jacob 2012, p.1-8) Green accounting tools are used to determine environmental cost due to organization operations such as emission of green house gases, depletion of natural resources and environmental degradation. It is the collective social responsibility of the government and business entities to adopt responsible behavior through monitoring eco-system degradation and controlling the occurrence of possible disasters associated with their activities. Corporate environmental reporting through the lens of semiotics This is the first paper obtained from ProQuest. The main objective of this study was to analyze the structuring of environmental accounting information by corporate organizations in order to gain the implied report meaning. A report reflects qualitative survey conducted for selected companies in Malaysia and Australia. Around 50 companies within the Asia-pacific region were sampled, and their financial reports analyzed (Haslinda &Glen 2009, 1-10). The methodology used in this study was qualitative survey where sampling was used to obtain the results. The main objective of the study was to determine the application of environmental accounting in the listed companies. The results indicated a lack of objective environmental accounting with word selection focused on producing mental concepts that earn positive public report. Suppressing negative environmental incidences is prevalent sending messages on image building for the company as responsible corporate citizens. The quality of disclosure is limited to corporate legitimating motives and lack informative content. Cross analysis indicates social pressure as the major motivation to information selections, organization and presentation to respond to public queries. In this study, the reports were taken through a commutation test focused on paradigmatic and syntagmatic dimensions of the disclosure. A system of words used and signified message attracts positive reaction from the recipient. Use of qualitative descriptions in environmental reporting allows creation and manipulation of preferred perception (Haslinda &Glen 2009, 1-10). From this analysis companies adopt methods that target stakeholder management limiting content to essential and significant information. The main objective of any business entity is to optimize profits with minimal risk hence concealing sensitive environmental details allows attainment of this goal. Qualitative description of current environmental project and projected future activities are conveyed in such a calculated format that manipulates the reader perception. Recognizing stakeholders’ rights is an essential factor to earning credibility and investor confidence. Corporations should therefore ensure consistent disclosure of information that reflects transparent resource investment and management for a sustainable environment required for company growth (Haslinda &Glen 2009, 1-10). Corporate boards and voluntary implementation of best disclosure practice in emerging markets: evidence from UAE listed companies in Middle East The main objective of this report was to highlight the influence of company management board on voluntary implementation of good corporate governance within UAE. The study was aimed at determining the disclosure practices in the listed companies as well as to determine their application of environmental accounting practices. To achieve this detailed analysis of sampled company reports was conducted to assess the level of disclosure for both financial and non financial information (Mohamed & Kami 2011, 1-10). The official deadline for compulsory compliance was set for the April 2010 for companies listed by the Securities and Commodities Authority (SCA). Financial disclosure was common for all companies as compared to non-financial disclosure. Information of ownership and governance remained highly guarded especially due to lack of board independence. Family ownership, partnerships and consolidated entities form the bulk of these organizations with relatively low good governance practices. Majority board members are not independent allowing conflict of interest to impede the process of offering quality leadership advice (Mohamed & Kami 2011, 1-10). Further lack of accounting and remunerations committee reflects the absence of personnel motivations systems hence low talent retention. Emphasis on board members should be shareholders translate to manipulations of existing management committees. Despite having acceptable board size of average members, these boards lacked balance stakeholder and gender representation (Mohamed & Kami 2011, 1-10). UAE is an emerging market with the majority of its directors drawn from within the company. High liquidity in the Gulf region translated to spontaneous primary market growth. As a result, a large section of IPO are over-subscribed this is interpreted as high investor interest hence little or no efforts to apply good governance as a tool to attract investments. The practice of corporate governance is mainstreamed to serve the interest of core shareholders with minimal reference to minority interest. The company secretary should have professional ability to discharge legal advice to the company. There is therefore needed for orientation and continuous professional training for both governors and secretaries (Mohamed & Kami 2011, 1-10). Another impediment of reliable environmental disclosure is lack of global accounting standards with reports on environmental issues being made on the basis of varied indicators. Companies highlight quantitatively environmental cost within their financial statement release to the public making the information in accessible to stakeholders. Failure to provide separate environmental reports means it is not possible for stakeholders such as investors, minority shareholders and the general public to perform comparative analysis (Mohamed & Kami 2011, 1-10). Most board members and management continue to view disclosure as a compliance requirement hence failing to appreciate potential to use it as an effective tool to business value addition. Strategic business management is required to educate this section on the significant role played by disclosure reports in projecting transparency and strengthening corporate governance. Globalization has reduced geographical barriers both in communication and trading. It is therefore important for UAE investors to embrace global corporate governance standards in which information disclosure is central. Increased personal and collective responsibility increases investment performance within the market place competition (Mohamed & Kami 2011, 1-10). Discussion Environmental accounting remains weak among UAE corporations despite its value in increasing business relationship with immediate community and attracting new investors. Good corporate governance requires comparative utilization of company reports in making effective decisions. Various reports have shown availability of comprehensive reporting systems allows rational decision making based on current reality and not vague projections. Integration of both conventional and non conventional environmental cost and liabilities translates into accountable exploitation and investment (Farouk, Cherian &Jacob 2012, p.1-8). This process however remains complex due to certain factors mainly identification, classification, measurement and reporting of environmental and social parameters. Physical and monetary accounting of environmental cost remains relatively undefined relying on the association between material flows, balances and physical environmental performance indicators. There is the need to establish sustainable measurement systems which should be adopted by all organizations in environmental accounting hence providing comparable reports which may be used to evaluate performances. Guided decision making leads to sustainable growth incorporations and environment. Maintenance of productivity, diversity and balance within the ecosystem depends on accountability in terms of decisions made which are further linked to sustainable accounting. Effective reporting enhances visibility of environmental dangers which are interpreted as corporate responsibilities (Farouk, Cherian &Jacob 2012, p.1-8). Embracing these changes allows the establishment of the dynamic relationship between industry and environment which is accounted for in terms of impact on productivity. It is the responsibility of the management and accounting department to explicitly report these impacts to all stakeholders. Effective disclosure increases credibility and opening forum for information and idea sharing for holistic development. Corporate governance is still are the infancy level among UAE corporations demanding informative education to create awareness. Sustainable benefits have been associated with efficient adoption of international financial and non financial accounting standards. They include decreased cost of capital, capital mobility, efficient resources allocation, improved and comparable financial reporting alongside increased investing opportunities (Farouk, Cherian &Jacob, 2012 p.1-8). Compliance with World Bank and IMF accountability demands always corporate opportunity to compete globally rather than confinement within the SCA region. UAE economy relies on its immense oil industry making environmental accounting an essential feature especially with the introduction of free trade zones and its establishment as the trade centre for Middle East. This brings in increased pressure for global accountability and adoption of standard accounting practices. This would project the image of integrity, efficiency and transparency necessary for global competitiveness. This process continues to face adoption challenges duet to UAE culture of secrecy among family owned and partnership companies which were not used to disclosing financial and non-financial information to central regulatory body. Negative perception towards foreign investment limits acceptance of UAE companies ‘outsiders’ into their business governances. Conclusion Accountability both at personal and collective levels is essential in corporate governance. This is reflected through accurate reliable information disclosure to all stakeholders through accounting reporting. While financial accounting has been integrated in the majority of UAE organizations environmental, governance and other non financial disclosure receive below average practice. Reliance on oil exploitation in UAE states demands higher levels of green accounting to gain credibility and sustainable competitiveness in the global market. Besides attracting new investors, foreign and local, green accountability provides the company management with organized reporting systems essential for comparative growth analysis and project sustainability. Accurate disclosure involves objective reporting as opposed to manipulative structuring that focus on diverting reader perception. Rational decision making should be based on rational information provided through quantitative or qualitative reports. For increased accessibility, it is advisable to prepare separate environmental reports instead of combining it within the financial report. This paper has enabled me to understand the importance of accountability and financial disclosure. I have also learned on the importance of environmental accounting which involves recognition and disclosure of corporate environmental cost and liabilities in financial and annual reports. Its importance is because of the social responsibility which entities have to the environment. References 1. Farouk Sherine, Cherian Jacob &Jacob Jolly, 2012, Green Accounting And Management for Sustainable Manufacturing in Developing Countries. International Journal of Business and Management. Canadian Centre of Science and Education. 2. Haslinda Yusoff &Glen Lehman, 2009, Corporate Environmental Reporting Through The Lens of Semiotics. Asian Review of Accounting .Emerald retrieved at http://search.proquest.com/docview/609091748/13DA566FF3330C59EBB/1?accountid=145382 3. Irvine J. H & Lucas N, 2006, The Globalization of Accounting Standards: a Case of The UAE. In Proceeding of the Third International Conference on Contemporary Business, Leura, New South Wales, Charles Strut University 4. Mohamed Adawi & Kami Rwegasira, 2011, Corporate Boards and Voluntary Implementation of Best Disclosure Practices In Emerging Markets: Evidence From UAE Listed Companies in Middle East. International Journal of Disclosure and Governance. Palgrave Macmillan retrieved at http://search.proquest.com/docview/879691118/13DA565402D12850CA0/1?accountid=145382 5. Todea Nicolea, Stanciu Ionela Cornelia & Joldos Ana Maria, 2010, Environmental Accounting-A Tool Used By The Entity For Determining Environmental Cost. Annales University Read More