The paper "Contemporary Issues in Accounting: Voluntary Disclosure" is a great example of an assignment on finance and accounting. This is a fundamental provision of accounting information by a firm’ s management that goes beyond stipulations like the one represented within the generally accepted accounting principles and ASIC standards, rules, and regulations (Eng & Mak, 2003). This information should be perceived as being relevant to the end-users of the accounting information of a company’ s annual report. It is important to note that the aspect of voluntary disclosure is conducted by numerous organizations and also, the nature and extent to which it is conducted varies with such aspects as a region, industry, or even the immediate size of an underlying firm (Eng & Mak, 2003). It is stated that the fundamental quality aspect of corporate disclosure within an annual report is able to influence the extent and effectiveness of investment decisions that are to be made by the immediate investors (Eng & Mak, 2003).
Most importantly, annual reports are perceived as being a crucial platform for portraying the concept of accountability in both the corporate and government-based domains.
It is also a way under which the two sectors can use to improve on the stakeholders’ perceptions of their level of accountability position. In recent researches, it was established that many annual reports of most firms failed to avail of a significant portion of voluntary items that stakeholders perceive as being crucial or even essential (Eng & Mak, 2003). 2: Accountability, Legitimacy and Stakeholder Theories Accountability Theory: This is an accounting disclosure theory that perceives companies in regard to their management capabilities as they undertake actions to the concern of external stakeholders.
It is directly involved with the aspect of monitoring, evaluation, and control of organizational parties in order to ensure that they are able to act in the immediate interests of the existing shareholders as well as stakeholders (Ho & Wong, 2001). The aspect of accountability is reflected in two well-known facets; first, there is a path that seeks to expound on the relationship between a firm and its shareholders. In this case, the fundamental focus is reflected in the financial information of annual reports. Second, there is another path that seeks to expound on the immediate relationship between corporations and its immediate stakeholders so that its spotlight would be based on any given disclosure that is found within the annual report (Ho & Wong, 2001).
It is important to ascertain that the management is supervised, analyzed, and controlled in a manner that would ensure that it acts in accordance with the interests of the shareholders as well as other stakeholders (Ho & Wong, 2001). Stakeholder Theory: This theory is based on two fundamental theories, which are the ethics-based theory and a positive based one.
The ethics-focused theory of stakeholder theory is largely focused on expounding the manner for which firms should treat their immediate stakeholders while putting much emphasis on the responsibilities attributed to the firm at large. In consequence, positive focused theory, of stakeholder theory, put much emphasis on the need for managing a given set of stakeholder groups especially the most influential ones (Ho & Wong, 2001). These stakeholders are considered to be powerful given that they are able to control a significant portion of resources that are needed by a firm’ s operations as well as for its survival (Ho & Wong, 2001). Legitimacy Theory: This is a fundamental theory that provides a distinctive theoretical based viewpoint in regards to social and environmental accounting concepts for purposes of expounding on a firm’ s motivation for the process of reporting.
It is focused on alerting the society of an equivalence of actions and values that exists (Bamber, Xuefeng & Isabel, 2010). The management of a given firm would react to the numerous public outcries over corporate actions by way of catapulting the immediate level of corporate disclosures in their respective annual reports.
This is only executed whenever it is ascertained that the legitimacy is thereby threatened by the aforementioned public outcry (Bamber, Xuefeng & Isabel, 2010). Question 3 A company would put more effort into making positive voluntary disclosure as opposed to making negative disclosures. This is because such positive disclosures as the corporate social responsibility will improve a corporate image in regards to assisting the society through education sponsorship or in making disclosures about their commitment to the protection of the environment upon where it operates.
CSR and sustainability are good examples of positive voluntary disclosure that firms provide to shareholders for purposes of enhancing the market knowledge as well as in comprehending the immediate strategies employed by the operating firm. In regards to Cochlear Company, the notion behind disclosing such aspects as its immediate environmental governance is set to create awareness to the surrounding communities of its commitment to undertake production and manufacturing processes in a way that meets the expectations of the communities. For instance, the firm deploys the use of advanced technologies in regard to recycling wastes and also the prevention of pollution.
Positive disclosures signify the important attribute that the firm is also conversant with the legal frameworks around it hence, portraying a relevant picture to society that it is not in the business of only maximizing profits but also ensuring that care is undertaken in the process. Question 4 Voluntary Disclosure Page Number Identified Theories Positive Or Negative Letters to Shareholders Page 4 Stakeholder theory Positive theory since it reflects on providing the shareholders with information pertaining to the new strategies and products formulated in the course of the year Environment, Social and Governance (ESG) Page number 6 Legitimacy theory Positive theory because it ascertains the information pertaining to environmental awareness, social support, and modern global headquarters. Our People Page number 8 Ethics Based Theory Positive theory since it articulates the manner for which the immediate stakeholders of the firm are treated and recruited for that matter. Driving Innovation Page number 9 Legitimacy theory It falls under positive theory since it provides stakeholders with information pertaining to the numerous technological advancements made on the products. Question 5 Letters to stakeholders are depicted as a stakeholder theory that is set to avail information to the most influential stakeholders of the firm in matters related to systems and processes of the company as well as information that pertains to dividends and remuneration (Cochlear, 2014).
For instance, Cochlear provides its products to over 300,000 people across the globe where the components are regulated. It is disclosed that the environment under which the distribution is made is complex in nature hence requires a set of modern systems as well as processes that are capable of operating on a global perspective. Under this segment, the dividend amount is stated at $1.27 per each share held. In regards to remuneration, the report discloses that the board of the firm uses a structured procedure that is cognizant of aspects of fairness, market competitiveness that also takes into consideration a compensation package that involves a base remuneration relating to skills and expertise coupled with an aspect of risks and rewards incentives. The Environmental, Social and Governance (ESG) is expounded by legitimacy theory since it focuses on environmental aspects for which the firm is committed to expounding on to the numerous public platforms (Cochlear, 2014).
The environmental awareness segment discloses that the company is committed to catapulting the lives of its immediate stakeholders. This is especially achieved by way of promoting technological innovativeness within the medical device industry in order to execute safe and best practices of business principles. Consequently, the firm supports employees known as the “ green fever” whose objectives are structured towards creating awareness on environmental issues as well as in the promotion of sustainable living conditions at both work and home. In regards to manufacturing processes, the firm holds an EPA license that governs its usage and control of such aspects as wastes and pollution in Australia.
In regards to social support, the firm supports the tertiary sector, existing communities’ healthcare facilities. Our People segment is fairly represented by the ethics-based stakeholder theory since it focuses on treatment and recruitment set for employees of the firm. This is basically reflected in aspects attributed to talent strategy, ongoing learning as well as those dealing with the diversity of leadership skills to fit in with employees of the firm altogether (Cochlear, 2014).
In regards to talent strategy, the firm strives to attract and also, retain the best of its recruits by way of availing a challenging and interesting work experience as well as also providing opportunities for possible developments related to the growth of the business. Question 6: Positive and Negative Voluntary Disclosures All of the voluntary disclosures made by the company are deemed positive in nature. This is because they are set to provide the shareholders with information pertaining to the new strategies and products formulated in the course of the year, ascertains the information pertaining to environmental awareness, social support, and modern global headquarters, articulates the manner for which the immediate stakeholders of the firm are treated and recruited for that matter and also because it provides stakeholders with information pertaining to the numerous technological advancements made on the products.
It is important the firms aspire to develop positive voluntary disclosures within their annual reports since it depicts their level of commitment to numerous issues affecting the operations of the firm in relation to the external stockholders of the firm for that matter.
Bamber, L, S, Xuefeng, J & Isabel Y, W. (2010). “What’s My Style? The Influence of Top Managers on Voluntary Corporate Financial Disclosure,” The Accounting Review, 85 (4)
Cochlear (2014), 2014 Annual report. Retrieved from http://www.asx.com.au/asxpdf/20140912/pdf/42s5cssxb7zxcd.pdf
Eng L.L. & Mak Y.T (2003). Corporate governance and voluntary disclosure. Journal of Accounting and Public Policy 22 (2003), 325-345.
Ho S.S.M. & Wong K.S., (2001). A study of the relationship between corporate governance structures and the extent of voluntary disclosure, Journal of International Accounting, Audit & Taxation 10, 139-156