Explaining why the 2003 Accounts Modernisation Directive needs to be amended
Discuss about the Intangibles Disclosure In Management Commentary.
The 2003 Accounts Modernisation Directive allows the companies to publish information that provides a comprehensive and balanced analysis of their performance and development during the fiscal year. The overall directive relevantly forces the organisation to present all the relevant information in their annual report, which was not previously demanded in the financial statement. The directive also portrayed the relevant measures that needs to be included in form of financial performance indicator and the non-financial indicators. Therefore, it could be assumed that the implementation of the directive would eventually allow investor to understand the financial and non-performance indicators affecting performance of the organisation (Ec.europa.eu 2018).
In addition, the 2003 Accounts Modernisation Directives was relatively designed for removing the conflicts that arise between directives and IAS. However, the design for the first 2003 Accounts Modernisation Directives was not adequate in reducing the overall problems of conflict between directives and IAS. Moreover, the Modernisation Directives was conducted to ensure the use of optional accounting treatments currently used under the IAS. Additionally, the directive accounts were amended to satisfy the existing accounting requirements that needs to be allowed by the organisation in formulating their annual report. Moreover, with the implementation of 2003 Accounts Modernisation Directives the overall UK government aims in facilitating greater convergence between UK accounting standards and IAS, while reducing the unnecessary burdens on the big companies operating in Europe (Ec.europa.eu 2018).
Furthermore, the overall 2003 Accounts Modernisation Directives was also not able to state the regulations regarding the dividend disclosure according to the international measure. In addition, the noncompliance of the Modernisation Directives on the disclosure of the dividends relevantly indicates the technical amendments that needs to be conducted by the 2003 Accounts Modernisation Directives for disclosing the information regarding dividends. The details regarding the overall dividend information needs to be sighted more detailed in the annual report for effectively stating the information on their dividend payments.
The 2003 Accounts Modernisation Directives mainly has adequate loopholes, which needs to be amended for improving the adoption of international recognised standards by large companies to promote comparability between the reports. In addition, the Modernisation Accounts Directive has relevantly helped in improving the level of problems that was faced by big companies in following the level of international recognised standards. Furthermore, the 2003 Accounts Modernisation Directives did not accurately evaluate the reequipments of annual report, which was amended in the 2005 Accounts Modernisation Directives. Moreover, the amendments needed in the 2003 Accounts Modernisation Directives did not comply with the measures of annual report requirements, which was needed by the organisation. the basis of European accounting requirements was relevantly amended in the 2005 Modernisation Directive to comply with the growing needs of big companies to comply and accommodate additional financial requirements (Camilleri 2015).
Evaluating the five scenarios discussed in 5th Workshop, while identifying the most suitable option
The amendments were depicted in the Modernisation Directive, where Fourth and Seventh Directives of the annual report, the Bank Accounts Directive, and the Insurance Accounts Directive in the consolidated annual account. In addition, the measure relevantly enabled the companies to follow modern transparent accounting practises, which is followed by the International Accounting Standards. The amendments were not provided in the previous version of 2003 Accounts Modernisation Directive, which did not depict the accurate position of the organisation addressing the comprehensive and balanced analysis of their performance. The amendments imposed on 2005 Accounts Modernisation Directives mainly reduced the problems that was imposed on big companies operating in IAS region (Fülbier and Klein 2015).
After reviewing the 2003 Accounts Modernisation Directives, many problems in the directives was found, where it was not able to comply with the IAS accounting measures. This relevantly increases the problems for the big companies who are operating in the European region. The organisation that were operating outside UK government had to comply with IAS rules and need to amend the annual report according to the reequipments. In addition, the two different annual report was to be maintained by the big companies for complying with the IAS and directives issued by the UK government. This relevantly increases problems for the organisation, as they must prepare the annual reports differently to satisfy the requirements of differently. Hence, the change in overall 2003 Accounts Modernisation Directives conducted through amendments eventually helped in minimising the conflict between the IAS rules and directives, while improve the level of financial report disclosures. The amendments were conducted to help the big companies and corporations operating in Europe, while portraying the accurate annual report to its shareholders (Catalfo and Wulf 2016).
The scenario 1 mainly helps in understanding the hypothetical condition where the no change in the overall language and requirements of the 2003 Accounts Modernisation Directives are conducted. In addition, the scenario states that in order to understand the accurate financial position the organisation needs to comply with both the directives and IAS requirements in their annual report. This relevantly helps in understanding the level of non-financial indicators of the organisation and how it could impact its future performance. The scenario also indicates that the overall information regarding the environment and employees matters in the annual report.
From the evaluation of above scenario 1, relevant pros and cons for the hypothetical condition can be evaluated, which might affect the conditions of organizations while preparing their annual report. the first prove that could be identified from the scenario is that the investors would eventually get more information regarding the company and its operations. this would provide them with adequate information to conduct the relevant investment decisions. On the other hand, the major disadvantage of the scenario is that the organization must compare two different annual reports to comply with the two different standards. This would increase the time consumption of preparing an annual report and expenses of the organization (Pisano and Alvino 2015).
The second hypothetical condition literally indicates that the modernization directive needs to be unchanged but new European directives needs to be maintained in the stock market for the public-sector companies. This would eventually help the companies to disclose ESG performance of a condition for being listed in the stock market. Moreover, the scenario indicates that relevant ranking could be conducted on 50 socially relevant criteria’s for ranking the company according to the accounting information that they have presented in their annual report. The scenario indicated that this would eventually help motivate the organizations to comply with both the rules and regulations while preparing their annual report.
However, the scenario has relevant disadvantages and advantages for the investors and organizations. The major disadvantage for the investors is the evaluation of ESG performance, which is only based on ESG ranking of how the organization is presenting its annual report. This is not a confirmation of the future financial performance of the organization but a significant ranking that will only portray the relevant information that is provided by the organization. This will create distortion among the investors and would not help them make adequate investment decisions. On the other hand, the major advantage is for the capital market, who is able to understand the overall financial performance of the organization and the information provided in the annual report (Camilleri 2016).
The third hypothetical situation indicates that new directive needs to be proposed for disclosing the overall financial report of the organization. The previous accounts modernization director needs to be discontinued while the new implementation would eventually help in evaluating the companies on the basis of ESG criteria. Moreover, in the industry specific key performance indicators needs to be implemented in the new directives to improve the effectiveness of the annual report. this would eventually help the organization to indicate their actual performance to the investors and allow them to make adequate investment decisions. The process requires 15 key performance indicators which needs to be depicted in the annual report of all companies.
The major advantage of this hypothetical situation is to improve the standard reporting process which would eventually help in reducing the divergence between different National approaches. Therefore, the organizations with the help of new policies could help in detecting the financial performance of the organization while following all the directives of the new hypothetical situation. The major disadvantage for the overall hypothetical situation was the non-continuance of disclosures conducted by organizations. The measure did not make reporting mandatory which failed to improve the overall world entry reporting programs that is being implemented by EU member states (Mundigl 2014).
The fourth scenario in the case and suggest that development of strengthen mandatory principles at the EU level with two sets of internationally recognized KPIs needs to be conducted. This would eventually help in revising the 2013 accounts modernization directive to comply with and explain the provisions for reporting the proposal that would apply to all private and public companies in EU. The companies would directly identify in the most material ESG opportunity and risk that needs to be evaluated for identifying the financial performance of the organization. The bribe, corruption, and human rights is evaluated in the new suggested principles, which directly set the rules regarding the overall social license to operate indicators for the organization.
The major advantages of the new hypothetical situation are that it would allow the investors to understand the ethical measures conducted by an organization while conducting their operations. This would eventually help the investors to understand the overall performance of the organization and ethical measures used in preparing the annual report. The major disadvantage of the overall 4th hypothetical scenario directly suggests that the difference between the proposed he pays for economic factors and dose of social license to operate were ambiguous to decipher in practice (Szabo and Sorensen 2015).
The fifth hypothetical scenario directly indicates that all the companies in European directives needs to comply with a completely new set of directives, which could eventually help in improving the level of disclosure in their annual report. Not only the medium size and cities or large organizations but the small companies also need to follow the same type of disclosure requirements. This would eventually help in improving the level of information disclosure by the organization to its relative investors. The proposal also depends that 15 for non-financial KPIs will be used in disclosing the overall ESG performance of an organization. this would eventually allow the investors to identify the actual key performance indicators of the organization, which would help them to generate higher rate of return.
The positive attributes of fifth hypothetical Scenario relatively indicates that the investors would eventually detect the actual financial performance of all companies under the EU rule with standard disclosure requirements. However, the major disadvantage of the scenario is that small and micro entities are forced to comply with the rules and regulations laid down by the EU authorities regarding the disclosure measure of the annual report. This who directly increase the overall expenses conducted by these companies on their financial reporting structure and hamper their financial condition (Mamic-Sacer 2015).
After evaluating all the hypothetical scenario that would be identified that scenario 5 is the most viable option for the companies in EU. this hypothetical situation directly allows the organizations to follow one specific ruling which will not change in future and allow the investors to evaluate the performance of the organization on one level regardless of their size. All the other situations relatively indicate Complex measure that needs to be followed by only one specified companies for disclosing that annual reports. However, the implementation of hypothetical scenario 5 would eventually help all the companies to disclose their annual report according to the 15 KPI standard. This would eventually help in maintaining unity and ambiguity Among the organizations while disclosing the annual report. The accommodation of scenario 5 ruling would also allow the investors to use only one type of calculations, which was previously not possible by the organization you due to do different disclosure rules present in EU.
Reference and Bibliography:
Camilleri, M.A., 2015. Environmental, social and governance disclosures in Europe. Sustainability Accounting, Management and Policy Journal, 6(2), pp.224-242.
Camilleri, M.A., 2016. Corporate Social Responsibility Reporting in Europe. In Key Initiatives in Corporate Social Responsibility (pp. 21-41). Springer, Cham.
Camilleri, M.A., 2017. Case Study 2: Environmental, Social and Governance Reporting in Europe. In Corporate Sustainability, Social Responsibility and Environmental Management (pp. 119-138). Springer, Cham.
Catalfo, P. and Wulf, I., 2016. Intangibles disclosure in management commentary regulation in Germany and Italy: a semantic approach. Journal of Intellectual Capital, 17(1), pp.103-119.
Ec.europa.eu. (2018). [online] Available at: https://ec.europa.eu/internal_market/finances/docs/actionplan/transposition/uk/d8.2-uk.pdf [Accessed 13 May 2018].
Elzahar, H., Hussainey, K., Mazzi, F. and Tsalavoutas, I., 2015. Economic consequences of key performance indicators’ disclosure quality. International Review of Financial Analysis, 39, pp.96-112.
Fülbier, R.U. and Klein, M., 2015. Balancing past and present: The impact of accounting internationalisation on German accounting regulations. Accounting History, 20(3), pp.342-374.
Gallego, R., Barbieri, N. and González, S., 2016. Reinterpreting the Multiple-Streams Framework from a Process Approach: Decision-Making and Policy-Shift in Public Health Management in Catalonia, 2003–7. Decision-Making under Ambiguity and Time Constraints, p.231.
Goebel, V., 2015. Intellectual capital reporting in a mandatory management report: the case of Germany. Journal of intellectual capital, 16(4), pp.702-720.
Hojnik, J., 2015. Disclosure of Environmental Information in Companies? Annual Reports Under EU Law Provisions. University of Maribor Jean Monnet Centre of Excellence.
Mami?-Sa?er, I., 2015. The regulatory framework of accounting and accounting standard-setting bodies in the European Union member states. Financial theory and practice, 39(4), pp.393-410.
Mundigl, S., 2014. Modernisation and consolidation of the European radiation protection legislation: the new Euratom Basic Safety Standards Directive. Radiation protection dosimetry, 164(1-2), pp.9-12.
Oxfordreference.com. (2018). Accounts Modernization Directive – Oxford Reference. [online] Available at: https://www.oxfordreference.com/view/10.1093/oi/authority.20110803095346563 [Accessed 13 May 2018].
Pisano, S. and Alvino, F., 2015. New European Union’s Requirements and IFRS Practice Statement “Management Commentary”: Does MD&A Disclosure Quality Affect Analysts’ Forecasts?. Journal of Modern Accounting and Auditing, 11(6), pp.283-301.
Rahim, M.M. and Vicario, V., 2015. Regulating quality in CSR reporting in Australia.
Szabó, D.G. and Sørensen, K.E., 2015. New EU directive on the disclosure of non-financial information (CSR).
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
