The paper "Contemporary Issues in Accounting Theory" is a great example of a report on finance and accounting. Voluntary disclosure can be defined as an accounting process whereby a company’ s management provides information that goes beyond normal financial requirements (Zechman, 2008). Some of the normal financial requirements include Securities and Exchange Commission directives and accounting principles. However, the company’ s management may provide additional information that it deems important for the relevant decision making of stakeholders who utilize the company’ s annual reports. Voluntary disclosure has become an important requirement and many companies have identified it as an important field in financial reporting research (Ling, 2007).
Some of the information that can be termed as voluntary disclosures may include nonfinancial information e. g. social responsibilities, strategic information e. g., company strategy and characteristics, and financial data e. g. stock price. The increase in the number of companies presenting their voluntary disclosures illustrates there are additional benefits associated with the process. The Three Theories In fulfilling organization requirements and especially those involving numerous stakeholders, some theories are important in determining the approach in which tasks can be accomplished.
Some of these theories are accountability, legitimacy, and stakeholder: Accountability theories – the theory states that it is the obligation of a company or individual to account for activities, be responsible for the outcome of the responsibilities and to disclose any information in a transparent manner (Zechman, 2008). It also includes responsibility for entrusted properties or even money. Legitimacy theory – Legitimacy theory states that companies should continually aim to operate within the norms and bounds of their specific societies and they should be viewed as “ legitimate” . The theory relies on the idea that there is a ‘ social contract’ between the company in question and the society in which the company operates.
This means the society has both explicit and implicit expectation from the company (Zechman, 2008). In addition, the theory states that the company must not consider the rights only of the stakeholders but also to the public at large. If the company cannot comply or maintain these social expectations, the society may institute sanctions such as legal restrictions towards their operations. Stakeholder theory – In the stakeholder theory, there are two braches which are ethical (moral) and managerial (positive) branch (Ling, 2007).
According to the moral (ethical) perspective, it is the requirement for the company to treat its stakeholders fairly without factoring into consideration stakeholder power. On the other hand, the managerial perspective states that it is likely for corporate management to fulfill the requirements and expectations of particular stakeholders especially the powerful ones (Zechman, 2008). This perspective argues that society should be viewed from different angles and to determine, which is the most appropriate strategy to ensure the company becomes successful. For example, some stakeholders may demand disclosure of certain social responsibilities compared to other stakeholders. Sustainability Report Disclosures Voluntary disclosure is important and benefits the economy, companies, and investors.
For example, it is easier for an investor to make decisions on capital allocation and is likely to lower the cost of capital, which translates to benefiting the economy (Zechman, 2008). Moreover, such an approach ensures a reduction of conflicts of interests especially in those companies that are widely held. The sustainability report has shown that Santos has elaborate on accomplishments and plans towards ensuring the society is taken care of.
AAP, Reuters. (22 February 2013). Santos 'on target' despite profit slump. The Sydney Morning Herald. Available at http://www.smh.com.au/business/earnings-season/santos-on-target-despite-profit-slump-20130222-2ev5l.html [Accessed 15 August 2013]
Cubby, B. (13 June 2013). Pilliga contamination: Santos to be prosecuted. The Sydney Morning Herald. Available at http://www.smh.com.au/environment/weather/pilliga-contamination-santos-to-be-prosecuted-20130613-2o5rq.html [Accessed 15 August 2013]
Financial Review. (20 May 2013). Santos oil well leaks 240,000 liters. Financial review. Available at http://www.afr.com/p/national/santos_oil_well_leaks_litres_UysxzpK1dmvVqMsbrOz2MP [Accessed 15 August 2013]
Ling, Q. (2007). Competitive Strategy, Voluntary Environmental Disclosure Strategy, and Voluntary Environmental Disclosure Quality. Oklahoma: Oklahoma State University
Zechman, S. (2008). The Relation between Voluntary Disclosure and Financial Reporting: Evidence from Synthetic Leases. Pennsylvania: University of Pennsylvania