Introduction
This paper discusses and analyses articles. It also shows a case study about environmental reports of Australian firms and its development during 1997-2006. Combining theories and the case will be useful in evaluation tool to describe the decade change in environmental disclosures of Australian firms. For reference, the significant turn-around in disclosure practices of Australian firms is presented in appendix 1. The prose used in this presentation is description-assessment type with analysis.
Wells and his Suggestive Analysis
The 1976 article of Wells was basically intended to argue with previous admonitions of Nelson (1973) including that of (1974) on how they devalue a priori research in accounting. Within his article, Wells had explicitly laid down his arguments directly undermining the claims of the three authors (on insignificant advancement and doubtful value of a priori research in accounting p. 477 and its theoretical deficiency p. 478). He initially related accounting to science in an attempt to use Kuhn (1970) ideas about scientific revolutions that then strengthen his claim that the weaknesses of a priori research in accounting came from the process of accounting revolution. And until the old set of ideas move to new and complete the five revolutionary steps, the weakness would seem to be eminent, but when seen in a different view, weakness can also be beneficial.
The heart of Wells’ argument was to relate accounting to science to be able to use the ideas of Kuhn. However, as admitted by Wells (p. 472), accounting undergoes evolutionary rather revolutionary process which could then defeat his anti-thesis on Nelson’s insignificant advancement of a priori research in accounting. The anti-thesis was that alternative views went to be thought in schools which was the basis to prove that significant advancement do occurred with reference that prior to Wells’ article (primarily in 1960s) teaching such alternatives to schools were not prominent. In view of this, Nelson should be given by Wells the doubt for the error as the latter time of analysis would be the evolution itself specifically the emergence of step 5. In the contrary, Nelson could be partially deceived by the awareness of the communities about the vitality of steps 1 to 4 that such communities did not created too much noise (as to prevent oversight from authorities or another round of debates from conflicting schools of thought) that Nelson would have been taken note.
Kuhn did not relate science to accounting rather politics (p. 472). However, Wells had maneuvered his article to emphasize that revolution is necessary in accounting. Science is a potential source of revolution because when two scientists with conflicting ideas argues (like Galileo experiment on Leaning Tower of Pisa to refute Aristotle’s view that the 10-pound weight will fall faster 10 times than a 1-pound weight) an instant winner or replacement to the original knowledge could emerge. The same is true with politics. When an old political ideology (communism or dictatorship) has already been inconsistent with time (as values of people changed as affected by different factors, say, globalization), people power or civil war could ensue triggering a revolutionary/ instant change in leadership and political system. In the contrary, accounting does not have the same social emphasis unlike the former examples. The subjective (generally against science) and diplomatic (mere option for political reconciliation) nature of accounting evolution prohibits its capability to result in revolution. Revolution requires abruptness in results. As stage 1 of accounting revolutionary process is attached on relevant economic effects (Great Depression) or big corporate scandals (the recent Enron fall), the start of the process would be explicit while the others (until step 5) would be implicit.
Revolution is unlikely because accountants who are interested in establishing schools of thought are minimal (only those employed by international organizations like ASCAP or national professional groups) while the most of them are within independent associations especially in the private ones. As such, the latter groups are embedded in varying goals of their employers that limit their capability to participate in the accounting revolution. To save energy and secure their jobs, they are used by their employers (who are profit-oriented) to manipulate, oftentimes, bypass regulatory constraints provided by the former groups to serve the self-vested interests. As there are no strict rules in the revolution process (p. 474), that is, non-regulatory accountants are not bound (even allowed) to conflict the regulation imposed (defeating the revolutionary steps) but may insert their modifications as long as properly audited, settlement of differences of the two groups will be the dominant theme.
Thus, a priori research of accounting admitted by as being theoretically deficient held its ground. The deficiency was brought about by the limited number of analysts willing and able to argue their views as such can be detrimental to their respective employer’s goals and opposing to regulations being imposed. There could be anomaly (the onset of stage 1), say, in historical-cost based system but the basis to become insecure varies to these two factors that makes the development of alternative sets of ideas and school of thought possible but domination of new practices unlikely. This is the significance of discussing accounting thought within the frame of strict rules such that after steps 1-4 (no rules attached) step 5 will give rise to rules in order for domination stage to follow. This is why regulation bodies are created in international and national levels. As strict rules need not apply, revolution would be associative of indications not a direct observation since step 5 will implicitly and symbolically emerged. Thus, Wells’ argument might come from personal vigilance or his period had emitted numerous indications of step 5.
Lastly, Nelson’s statement that a priori research in accounting had doubtful value was translated by Wells into positive approach. The rationale was that debaters possessing this in their conflicting ideas aid accounting evolution. But since there are regulating bodies and private accountants, “anything goes” or the pre-paradigm features of the evaluative process would be dictated by the former according to its own means but manipulated by the latter according to its own ends. Thus, the doubt will continue to be used by these actors with different goals (one is administrative while the other is operational) to prevent revolution from happening, if not, being felt by the community or the society in entirety.
If any, Wells succeeded in claiming that a priori research in accounting served as the catalyst for new disciplinary matrix (p. 480). This is shown how accounting and auditing policies are enforced to maintain shared commitments and values of accounting intact as response to globalization where technology affected how people thinks while being multicultural countries become common. Another, and more relevant to the bulk of his discussion, was his reluctance to accept the analogy of science and accounting with regards to revolution and its implications. By doing so, Wells had already implied that his analysis of revolution in accounting thought was merely meant to arouse the consciousness of authorities, the accounting community and the public that revolution could be on its way as evolution suffered its century-old long consequences. This makes the question mark on the title more suggestive of Wells’ objective.
Case Study: Report of Australian Conservation Foundation (ACE)
Director’s report remains to be one of highest (p. 7), and more appropriately, it is a strategic medium corporation used to summarize their environmental performance. With reference to Qantas Annual Report 2004, the Director’s report was used to serve self-interest of the reporting entity, even misled the intention of the disclosure requirement, by merely stating “that there was no significant environmental incidents which are material in nature”. Basically, the ACE disputed this style of reporting with respect to consistency in disclosure and pushed to amend the legal provision to clarify that materiality in Section 299(1)(f) of Corporation’s Act. This materiality should refer to being material to environmental not financial structure of the entity if it committed disclosure failure and subjected to prosecution or fines.
In the same manner, the succeeding exposure of ACE that cited deficiencies of Section 299(1)(f) confirms why Australian legislations seemingly were unsuccessful to induce firms towards environmental disclosure. This is because ACE found loopholes in certain legislations that resulted to misconceptions of firms that can either be intentional or deductive in nature. ACE wanted clarification, or at best, more explicit disclosure requirements because firms (ten years after research) still do not report voluntarily especially on negative performance. For example, Coles-Myer 2004 Annual report disclosed its environmental report in one sentence that referred to the occurrence “of no particular and significant environmental regulation applied in its operation”. As the firm belonged to Australia’s top 10 companies and had environmentally-sensitive subsidiaries like service stations and auto repair shops (not to mention that this firm was one of the successfully prosecuted companies of Environmental Protection Authority or EPA between 1990-1993 (p. 17)), ACE was moved for clarifying the words “particular and significant” in the legal definition. They are aware that the law can be circled by some firms that potential confusion (as this can be used as a scapegoat) should minimize.
Further, with relevance to findings (p. 13) together with other previous researches, firms with environmental disclosures still used them for corporate image building. This is reflected in Orica 2004 Annual Director’s report in which the company was under an on-going clean-up of a certain botany garden but failed to note that the clean-up was due to the failure of Orica to pursue EPA regulations in New South Wales. As Amcor Ltd had attempted to play down its disclosure prosecution in 1991 (p.10), Orica was doing the same face-saving strategy, even misleading contribution, more than decades after. Due to this, ACE intensified its campaign to minimize these misleading disclosures because the liability of a firm is only short-term to EPA while the adverse impact to environment and eventually society is long-term in nature far from what fines or other penalties can remedy. In doing so, ACE is assured that legitimacy theory (p. 4) will be derived from the actual environmental performance of the firm.
These foregoing led AS to question not only the guidelines but also the enforcers of them. The article of mentioned the research of Trot man (1979) that disclosure increases over time, and together with Bradley (1981), increases with firm size (p. 2). However, as legislation against Australian firms is geographically bounded within its borders, small firms ten years ago who are now big firms and big firms who are now likely operating internationally may not as well coincide with these findings. AS cited BP’s pollution in Papua New Guinea and Esmeralda’s cyanide spill in Hungary and Romania not reported in their respective environmental disclosures due to geography constraint to Australia alone. It is also interesting to note that BP which underwent scrutiny by Guthrie and Parker (1989) was found not to relate legitimacy theory in its voluntary social disclosures (p. 3). In view of this, the point of AS becomes more important as the firm could commit worst environmental practices in other countries that can be detrimental to the international image of the country.
Conclusion
The analysis of Wells has implications to the decade-old study research of . Revolution is not explicitly admitted to be present in accounting thought. Therefore, the level of objectivity of environmental disclosures from the time of study to the current situation in Australia today was resulted to be almost similar. This is because the five steps of revolutionary change are not completed by Australian conditions. Although it is noticeable in our analysis that anomalies abounds in environmental reporting throughout the decade in question in which legislations as well as the number of NGOs had increased to resolve the anomalies, step 5 would not be attained because legitimacy theory is ever changing. This is not to mention that step 2 (insecurity) of disclosure guardians might be easily resolved by accountants that are endowed with manipulative capabilities when it comes to reporting.
Appendix 1: Developments in the Post- Article (1997-2004)
2004 – Perceptions of NGOs about ED performance after ten years was unchanged
– NGOs and other stakeholders wanted to improve ED provided by firms
– ED does not necessarily attempt to influence corporation’s activities
– The majority of NGOs targets government lobbying to induce ED compliance
– Relevant information is necessary to support accountability claims
– NGOs are skeptical on industry self-regulation
2002 – Environmental disclosure (ED) seen as a means to install corporate change
2001 – Reasons of providing ED is survival
– Australian public policy supports industry self-regulation
2000 – Reiteration that ED is used to build corporate image
– Firms that lack ED also reflect lack of commitment to transparency
– Companies may have other priorities within social responsibility disclosure but not necessarily ED
1999 – ED is a pre-requisite to enter industry affiliation
– Awareness of the public and NGO pressure was proven to induce ED compliance by firms
1998 – ED is used to counter unfavorable media attention
– ED as reflection of financial performance
– Companies may be responding to influential lobby groups regarding on ED compliance
1997 – Several ED deficiencies was caused by the expectation gap/ higher standards than companies can bear or aspire
Credit:ivythesis.typepad.com
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