Impact on BP
This study has been prepared to analyze all the accounting laws, penalties and fines imposed and financial implications. This report will provide how public interest theory has affected the BP responses for mitigating negative impact of Deep water Horizon Oil spill. By evaluating this Deep water Horizon Oil spill case study, it is evaluated that Government and politician of Gulf country had changed safety policies and laws for the interest of public. There are various strict and uncertain liabilities which have been imposed on the BP for its less efficient business. There is several direct and indirect impact of Deep water Horizon Oil spill on the people living in gulf countries. This oil spill has occurred due to the less efficient and low level of safety mechanism of BP. In this report, various recommendation and discussion have been made which reflects how BP had made its responses towards mitigating all the negative impact of Deep water Horizon Oil spill. This report will be consisted of various part such as point of discussion, reflection on the Deep water Horizon Oil spill case and how BP mitigate these negative responses. In the end, conclusion have been given which will help in determining the all the valuable recommendation for BP (Zhuang, 2016).
The discussion has been formulated on the all the negative impact of Deep water Horizon Oil spill in gulf countries and other motivational factors for the politician and government to make changes in corporate social responsibilities laws and regulations. Politician and government of Gulf countries had made drastic changes in safety mechanism and laws for the installation of effective eco system in the business areas. BP had faced various penalties which have resulted into various losses to organization. BP had also opened escrow account to discharge its legal liabilities. However, BP had not deposited money for uncertain fines and penalties which are yet to be proven. It had also invested its big amount of capital for the public interest and keeping environment safe and healthy for the public. In this case it is given that BP had made shown negative downturn of profits in its financial statement. BP had loss of $ million 11071 in 2009 which occurred due to the case of Deep water Horizon Oil spill. Moreover, $ 500 million had been invested by BP to develop effective level of eco system in its research and development department. These all the activities have been provided by BP to strengthen its safety mechanism and comply with all environmental laws and regulations. The main discussion point and argumentative viewpoints in this report has been prepared on the financial implication and regulatory compliance of BP. It has shown all of its expenses and investment in its research and development department as revenue expenditure in its financial statement (Wiens, 2015). As per the IFRS rules and regulations all of these expenses which are incurred for the first time or development of project then company should charge all of these expenses as capital expenditure. If a company charges these expenses as capital expenditure then it will reflects high amount of decrease its profit earned. Bp had charged its investment amount to develop eco system as revenue expenses which had resulted into $ million 11071 loss in its financial statement. Bp had failed to disclose all financial and non financial information to its stakeholder. BP had less amount of transparency of its business functioning which had destructed its brand image and lower down shareholder’s confident in the reporting frameworks of BP. In order to establish effective level of reporting frameworks, BP needs to follow international reporting frameworks which will surely help it to disclose required amount of financial and non financial information to its stakeholders. BP had followed wrong accounting policies which had manipulated the actual profit of BP after the case of Deep water Horizon Oil spill (King, et al. 2015).
Impact on People Living in Gulf Countries
BP had faced several losses due to penalties and fines imposed on it by government of gulf countries in the public interest. BP invested $500 million in its research and development department to develop eco system (Boyd, 2010). Public interest theory shows that if an organization is working in society then it would give backs what it has taken from the society for operating its business. It is evaluated that If BP had made proper level of disclosure in its annual report then could have increased its accounting and financial reporting frameworks. On the other hand, as per the AASB 137 and IFRS rules and regulations, BP should have charged all of its expenses and investment in its research and development department and establishment of eco system as capital expenditure instead of revenue expenditure. Bp had charged its investment to establish eco system as revenue expenditure which had resulted into $1170 million loss in its business functioning. BP had taken advantage of these losses to reduce its tax implication. However, as per the public interest theory, if company had made damaged the society and environment through its business functioning then it should make its efforts to mitigate all of its negative impacts. BP should have paid all its taxes, penalties and fines in order to discharge its social land corporate responsibilities (Liu, et al. 2016). In addition to this, investment made by BP in establishment of eco system also did not provide satisfactory result in gulf countries. In the public interest, government of gulf countries passed new environment regulation for the corporation for operating their business. They established provisions that all the business and operations of business should be set up in only industrial area. In public area no commercial activities would be operated. This Deep water Horizon Oil spill case had strengthened all the regulatory and safety mechanism rules in gulf countries for the public interest. However, on the international level, various authorities had made compliance of corporate social responsibilities mandatory for the betterment of society and environment (Bodle et al 2016). If BP needs to follow international reporting frameworks which will surely help it to disclose required amount of financial and non financial information to its stakeholders and strengthen its brand image. BP had faced these losses due to its less efficient business functioning. This Deep water Horizon Oil spill could have been stopped by BP from happening if it had establish efficient eco system and made proper level of compliance with all the regulatory frameworks.
Regulatory Compliance and Reporting Frameworks
Conclusion
There were several problems and shortcoming its reporting frameworks which had resulted into destruction in its brand image in the mind of stakeholders. Politician and government of Gulf countries have strengthen the environmental laws and regulations after happening of Deep water Horizon Oil spill case. In addition to this, BP had also failed to comply with all the international and domestic reporting frameworks. This Deep water Horizon Oil spill case had destruct the brand image of company and also resulted into loss of $ 1107 million in its business functioning. However, after analyzing the balance sheet of BP it is determined that company had increased its losses by charging its capital expenditure as revenue expenses. Bp had also not followed proper level of regulatory compliance. Therefore, it would be concluded that accountant and financial manager of BP needs to analysis all IFRS rules and accounting standards for disclosing proper information in the annual report. In addition to this, politician and government of gulf countries had made changes in socially and ecological regulatory requirement to strengthen the environment safety mechanism. These types of changes would not only increase corporate social responsibilities requirement but also help them to maintain effective level of transparency in the financial and non financial information (Lamendella, et al 2014).
References
Bodle, K.A., Bodle, K.A., Cybinski, P.J., Cybinski, P.J., Monem, R. and Monem, R., 2016. Effect of IFRS adoption on financial reporting quality: Evidence from bankruptcy prediction. Accounting Research Journal, 29(3), pp.292-312.
Boyd, J., 2010. Lost ecosystem goods and services as a measure of marine oil pollution damages. Resources for the Future DP 10-31, 25p
King, G.M., Kostka, J.E., Hazen, T.C. and Sobecky, P.A., 2015. Microbial responses to the Deepwater Horizon oil spill: from coastal wetlands to the deep sea. Annual review of marine science, 7, pp.377-401.
Lamendella, R., Strutt, S., Borglin, S., Chakraborty, R., Tas, N., Mason, O.U., Hultman, J., Prestat, E., Hazen, T.C. and Jansson, J.K., 2014. Assessment of the Deepwater Horizon oil spill impact on Gulf coast microbial communities. Frontiers in microbiology, 5.
Liu, Z., Liu, J., Gardner, W.S., Shank, G.C. and Ostrom, N.E., 2016. The impact of Deepwater Horizon oil spill on petroleum hydrocarbons in surface waters of the northern Gulf of Mexico. Deep Sea Research Part II: Topical Studies in Oceanography, 129, pp.292-300.
Wiens, J.A., 2015. Review of an ecosystem services approach to assessing the impacts of the Deepwater Horizon Oil Spill in the Gulf of Mexico.
Zhuang, Z., 2016. Discussion of ‘An evaluation of asset impairments by Australian firms and whether they were impacted by AASB 136’. Accounting & Finance, 56(1), pp.289-294.
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