The Main Motivation for Corporate Reporting - Essay Example

ACCOUNTING THEORY AND PRACTICE Introduction Businesses are established so that they can achieve the set goals and objectives by providing goods and services that meet the needs of their clients in the most effective manner. Businesses owners and managers are supposed to ensure that they create credible systems that can be used to enhance accountability in the businesses. In this case, the success of any business entity depends on the proper strategies that are set and the accounting systems put in place. These systems have to be recorded at all times in the life of the business so that analysis can be made and strategies to improve business operations can be determined. Businesses often engage in various activities aimed at improving it private and corporate image; these activities include corporate social responsibilities (Wilson & Blunt 2013, 65). These activities, as carried out in the business are aimed at showing the concern that the business for the environment in which it operates. The different activities that the business ahs to carry out have to be discussed and agreed at the planning stage by all the important stakeholders in the businesses. Corporate social responsibility programs are a way of the business showing appreciation to the people that it has been working with in the environment, who include the clients, the immediate environment and other stakeholders. The business, being a significant stakeholder in all business activities often expects that businesses can be responsible in their practices and provide information for their operations at all times when needed. For the government, this reporting is important so that proper taxation regimes for the business can be established. This underpins the fact that business reporting is an important and essential practice that has to be done at all times in the process of creating credible image for the business. This paper examines the importance of business reporting in the light of financial theories and other reasons that enhance the credibility and image of the business. The need for reporting in the light of accounting theories All businesses that have a focus on achieving success in their present and future events will often create effective systems that they can use in the process of recording and analyzing their business activities (Elliot & Elliot 2012, 24). Accounting is an important activity that forms part of credible business systems; in this case, all businesses have to ensure that they make a recording of all their activities so that they can be analyzing their progress and performance in the life of the business. Accountancy or accounting refers to the process of measuring, processing and communicating financial information of the different economic entities existing in the business environment. The accounting process is responsible for measuring the results of business organisations economic practices and relaying that information to various users that include creditors, investors, management and other regulators. The practice of accounting is often carried out under the theoretical accounting framework that uses specific theories, which encourage the need for recording the business transactions under various circumstances. In all these different circumstances, business accountants are supposed to understand the way they analyze and record financial and all other kinds information relating to the activities the business involves in. The accounting theories have been establishing in order to help accountants understand the need for analyzing and reporting financial information as well as other important activities that the business takes part in like the corporate social responsibility programs (Rankin 2012, 43). Some of the important accounting that underpins the need for business reporting are explained below. Usefulness The main reasons for financial accounting and the reporting process is that all the information provided in the different ways has to be helpful in the decision making processes during the life of the business. It is important to note that business management is all about making decisions; in this case, the business should ensure that it has all the tools needed for this process ready and available, thus the need for continuous recording and analysis of different kinds of business information. In order for the process to be effective, the accounting theories are supposed to take into consideration the different changes that the organisation faces. Most often, the business environment is very dynamic, changing persistently in line with the internal and external business environments. However, the bottom line remains that useful information has to be made available by the business in order to make credible decisions for the success of the business. Qualitative Characteristics The theoretical accounting framework explains that the accounting process in the business should be reliable, relevant, consistent and comparable. The relevance of accounting information refers to its ability to create a lasting difference to the decision maker. The reliability aspect means that the people using the information can rely on its accuracy in the process of making decisions (Merkl-Davies & Brennan 2011, 423). In order to receive these qualities, the accounting process has to focus on the laid down standards and procedures in collecting information for recording and analysis. in this case, qualitative aspect of the financial process in the process has to be in line with the Generally Accepted Accounting Principles (GAAPs). All the information provided in this perspective has to be consistent in the life of the businesses to enable effective comparison. Corporate Social Responsibility reporting In the modern business environment, some business have discovered the need to be socially responsible in its immediate environment and to all its stakeholders. Businesses have been expected to show concern for their actions and get approval from people they regard as their important stakeholders. When the businesses cannot meet the demands and needs of their stakeholders, they ruin their value and reputation in the business environment. Research has proven that businesses that have great social responsibilities often do better than their rivals who have less involvement in social responsibility programs and activities (Adams & Elliot 2002, 225). In all the business’ reporting aspects, accountability and transparency has been thought to be essential factors. These elements make it hard for businesses to avoid inspection. Businesses that have full disclosures of their financial and social responsibility activities build the image and reputation, thus increasing their competitive advantage and market position. In order for the business to have effective CSR and a credible process of the activities involved, it must have the legal, ethical, economic and other discretionary aspects that determined effective business performance as shown. Fig 1. Integration of the three dimensional formation of CSR (Moir, 2001) The economic responsibility is the initial and foremost social duty of businesses since they are the fundamental units of every society in which they exist. In this case, they expected to produce that with the society needs and sell it at a considerable profit. The legal dimension of the CSR requires that business work within the legal procedures and policies stipulated. They are supposed to follow and implement the codes of ethics as outlined in the legal framework (Bebbington, Larringa-Gonzalez & Moneva 2008, 341). The ethical responsibility refers to the extra actions. Activities and other behaviors those companies and other business organizations are supposed to operate. Business entities are expected to do what is fair and right to all its customers and other important stakeholders out of their own volition and not being coerced. Discretionary or philanthropic discretionary is often left for the business owners and managers to choose; the actions done in this dimension are not legally mandated but depend on the decisions of business owners and managers (Hooghiemstra 2000, 57). Some of the activities in this dimension include offering day care centres for mothers working in the business, environmental management and conservation and other programs. Conclusion Business reporting of the CSR activities and the overall financial activities is an essential process that needs to be give priority in all the business activities (Mahoney 2013, 56). Research has shown those businesses that undertake CSR activities and make its proper recording and reporting manages to create customer loyalty and confidence in their operations, which is an essential success ingredient for businesses. In the reporting process, emphasis should be placed on the qualitative aspects, which can be achieved by focusing on some of the important financial theories that offers guidelines on how the process should be conducted. Reliable information is that which can be compared over the periods the business has been in existence so that comparison can be made for proper decision-making (Thorne, Mahoney & Manetti 2014, 689). It is important to understand that all stakeholders have a right to information relating to the performance of the business for their various purposes. In this case, business owners have a duty to ensure that the accounting function of the business is effective and reliable, facilitating the decision making process in business activities. Bibliography Adams & Elliot J. 2002. Internal Organisation factors influencing corporate social responsibility and ethical reporting beyond theorizing. Accounting journal. Vol 15. No. 2, 223-250. 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