Accounting Theory

Questions (Deegan, C. (2009) Financial Accounting Theory, 3rd edition, McGraw-Hill)

3.33

Let us assume that the government has become concerned that existing disclosure regulation tends to fixate on the financial performance of organizations but fails to address other aspects of corporate performance, including a failure to provide information about corporate social and environmental impacts as well as about various initiatives and investments an organization has undertaken to improve its social and environmental performance. As such, the government has decided to introduce the legislation that will require business corporations to provide information about the social and environmental impacts of their operations, as well as the social and environmental initiatives undertaken by the corporations. You are required to do the following:

(a) Explain from a public interest theory perspective the rationale for the government introducing the legislation and how the government will ultimately assess whether any proposed legislation should actually be introduced.

(b) Predict from a capture the theory perspective the types of constituents that will benefit in the long run from any social and environmental disclosure legislation.

(c) Predict from an economic interest group theory perspective of regulation whether any potential legislation to be introduced will lead to an increase in the accountability of corporations in relation to their social and environmental performance despite any implications that this increased corporate accountability might have for the financial success of large but heavily polluting organizations.

4.28

The website of the FASB (as at early 2009 states that FASB intends:

To promulgate standards only when the expected benefits exceed the perceived costs. While reliable, quantitative cost-benefit calculations are seldom possible, the Board strives to determine that a proposed standard will meet a significant need and that...