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Describe advanced financial reporting.
Social accounting challenges conventional accounting, in particular, for giving a narrow image of the interaction between society and organizations, and thus artificially constraining the subject of accounting.
Social accounting, a largelyconcept, seeks to broaden the scope of accounting in the sense that it should:
- concern itself with more than only economic events;
- not be exclusively expressed in financial terms;
- be accountable to a broader group of stakeholders;
- broaden its purpose beyond reporting financial success.
It points to the fact that companies influence their external environment ( some times positively and many times negatively) through their actions and should, therefore, account for these effects as part of their standard accounting practices. Social accounting is in this sense closely related to the economic concept of externality.
Social accounting offers an alternative account of significant economic entities. It has the “potential to expose the tension between pursuing economic profit and the pursuit of social and environmental objectives”.
The purpose of social accounting can be approached from two different angles, namely for management control purposes or accountability purposes.
Social accounting for accountability purposes is designed to support and facilitate the pursuit of society’s objectives. These objectives can be manifold but can typically be described in terms of social and environmental desirability and. In order to make informed choices on these objectives, the flow of information in society in general, and in accounting in particular, needs to cater to democratic decision-making. In democratic systems, Gray argues, there must then be flows of information in which those controlling the resources provide accounts to society of their use of those resources: a system of corporate accountability.
Society is seen to profit from implementing a social and environmental approach to accounting in a number of ways, e.g.:
- Honoring stakeholders’;
- Increasingof corporate activity;
- Identifying social andof economic success.
Social accounting for the purpose of management control is designed to support and facilitate the achievement of an organization’s own objectives.
Because social accounting is concerned with substantial self-reporting on a systemic level, individual reports are often referred to as social audits. The first complete internal model for social accounting and audit, 1981, was designed for social enterprises to help plan and measure their social, environmental and financial progress towards achieving their planned objectives.
Organizations are seen to benefit from implementing social accounting practices in a number of ways, e.g.:
- Increased information for decision-making;
- Enhanced image management and;
- Identification of social responsibilities;
- Identification of market development opportunities;
According tothe “process of reporting on responsible businesses performance to stakeholders” (i.e. social accounting) helps integrate such practices into business practices, as well as identifying future risks and opportunities.The management control view thus focuses on the individual organization.
Critics of this approach point out that the benign nature of companies is assumed. Here, responsibility, and accountability, is largely left in the hands of the organization concerned.
In social accounting the focus tends to be on larger organisations such as(MNCs), and their visible, external accounts rather than informally produced accounts or accounts for internal use. The need for formality in making MNCs accountability is given by the spatial, financial and cultural distance of these organisations to those who are affecting and affected by it.
Social accounting also questions the reduction of all meaningful information to financial form. Financial data is seen as only one element of the accounting language.
Self-reporting and third party audits
In most countries, existing legislation only regulates a fraction of accounting for socially relevant corporate activity. In consequence, most available social, environmental and sustainability reports areby organisations and in that sense often resemble. While companies’ efforts in this regard are usually commended, there seems to be a tension between voluntary reporting and accountability, for companies are likely to produce reports favouring their interests.
The re-arrangement of social and environmental data that companies already produce as part of their normal reporting practice into an independent social audit is called asilent or shadow account.
An alternative phenomenon is the creation ofexternal social auditsby groups or individuals independent of the accountable organisation and typically without its encouragement. External social audits thus also attempt to blur the boundaries between organisations and society and to establish social accounting as a fluid two-way communication process. Companies are sought to be held accountable regardless of their approval.:10It is in this sense that external audits part with attempts to establish social accounting as an intrinsic feature of organisational behaviour. The reports ofin the 1970s on e.g. Tube Investments, Avon Rubber and Coalite and Chemical, laid the foundations for much of the later work on social audits.:9
Unlike in financial accounting, the matter of interest is by definition less clear-cut in social accounting; this is due to an aspired all-encompassing approach to corporate activity. It is generally agreed that social accounting will cover an organisation’s relationship with the, its employees, and ethical issues concentrating upon consumers and products, as well as local and international communities. Other issues include corporate action on questions ofand.
Social accounting supersedes the traditional audit audience, which is mainly composed of a company’sand the financial community, by providing information to all of the organisation’s stakeholders. Aof an organisation is anyone who can influence or is influenced by the organisation. This often includes, but is not limited to, suppliers of inputs, employees and,, members of local communities, society at large and.Different stakeholders have different rights of information. These rights can be stipulated by, but also by non-legal codes, corporate values, mission statements and. The rights of information are thus determined by “society, the organisation and its stakeholders”.
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Methods used in promoting social accountability and awareness include the following:
- citizen score card (CSC)
- tracking survey (PETS)
- citizen charter
Environmental accounting, which is a subset of social accounting, focuses on the cost structure and environmental performance of a company. It principally describes the preparation, presentation, and communication of information related to an organisations interaction with the. Although environmental accounting is most commonly undertaken as voluntary self-reporting by companies, third-party reports by government agencies, NGOs and other bodies posit to pressure for environmental accountability.
Accounting for impacts on the environment may occur within a companys, relating to, commitments and contingencies for the remediation of contaminated lands or other financial concerns arising from. Such reporting essentially expresses financial issues arising from environmental legislation. More typically, environmental accounting describes the reporting of quantitative and detailed environmental data within the non-financial sections of theor in separate (including online). Such reports may account for pollution emissions, resources used, ordamaged or re-established.
In their reports, large companies commonly place primary emphasis on, referring to the reduction of resource and energy use and waste production per unit of product or service. A complete picture which accounts for all inputs, outputs and wastes of the organisation, must not necessarily emerge. Whilst companies can often demonstrate great success in eco-efficiency, their, that is an estimate of total environmental impact, may move independently following changes in output.
Legislation for compulsoryexists in some form e.g. in,,, theand. In June 2012, the UKannounced the introduction of mandatory carbon reporting, requiring all UK companies listed on the Main Market of the London Stock Exchange – around 1,100 of the UKs largest listed companies – to report theirevery year.confirmed that emission reporting rules would come into effect from April 2013 in his piece for The Guardian.However, the date was eventually moved back to 1 October 2013.
Thehas been highly involved in the adoption of environmental accounting practices, most notably in the United Nations Division for Sustainable Development publication “Environmental Management Accounting Procedures and Principles”.
Social accounting is a widespread practice in a number of large organisations in the.,,,,, andall publish independently audited social and sustainability accounts.In many instances the reports are produced in (partial or full) compliance with the sustainability reporting guidelines set by the(GRI) and indexes including(reputation tracking of the worlds largest companies on Environmental, Social, Governance (ESG), Corporate Social Responsibility, ethics and sustainability).
plc, the fair trade organisation, claims to be the firstto publish audited social accounts in the UK, starting in 1993.
The website of thecontains a collection of
Companies and other organisations (such as) may publish annual corporate responsibility reports, in print or online. The reporting format can also include summary or overview documents for certain, a corporate responsibility or sustainability section on its corporate website, or integrate social accounting into its annual report and accounts.
Companies may seek to adopt a social accounting format that is audience specific and appropriate. For exle,, asks stakeholders how they would like to receive reports on its website;publishes separate reports for 11 of its operating companies as well as publishing an internal report in 2005;produced a tabloid-size, four-page mini-report in addition to its full sustainability report.
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