Points of Discussion
In this case study of Deep Water Horizon oil spill, it is clearly given that BP had to face various issues and problems related to accounting laws, financial implication, penalties and fines enforce on its business function. It is evaluated that due to Deep Water Horizon oil spill BP had to face various problems. The core focus in this report is to develop a view point which would either be in the favor and against the facts shown in this case study. In this case, it is give that BP had come up establishment of various eco system and safety measures for the safety of society. In addition to this, BP had also opened escrow account in which it had to put all the required funds. These funds would be used to pay off all the penalties and charges imposed on it. However, Bp did not deposit the amount of funds for the penalties and fines which are yet to be proven. The main discussion in this report is made on the financial implication and disclosure requirement of BP in its annual report. BP had failed to disclose all the financial and non financial information to its stakeholder. This study clearly gives idea about the penalties and fines which are imposed on BP. Deep Water Horizon oil spill is the biggest oil spill which had affected various people lives and also resulted into strengthen safety measurement policies and frameworks. There is various direct and indirect impact of ecological mechanism in Gulf Mexico country. In the end, several discussion and recommendation had been given which provides various factors of Deep Water Horizon oil spill. It also provides brief information about the direct and indirect impact of ecological and sociological services in and around the Gulf of Mexico. This Deep water Horizon Oil Spill has forced government and regulatory authorities to makes changes in mandatory requirement of ecological and sociological services used by all the organizations in Mexico. There are several discussion and recommendation given which reflects the true impact of Deep water Horizon Oil Spill (Boyd, 2010).
The main point of discussion has been prepared on the damages and negative impact of Deep water Horizon oil spill which had occurred due to the less efficient eco system by BP. BP had deposited funds in escrow account to the extent of liabilities and penalties amount which are certain. Nonetheless, those penalties and fines which are uncertain had not been taken into consideration by BP. After analyzing facts associated with the penalties and fines, it is evaluated that BP should have deposited all the penalties and fines in escrow account with a view to discharge all the liabilities to the society. However, BP had indulged in establishment of various eco- system which had resulted into non productive and had not made positive effect. On the other part, while evaluating the financial implication, it is observed that BP had not made complete level of disclosure in its financial statement. Moreover, after analyzing the annual report of BP, it has been evaluated that total profit of BP in 2009 was $ million 6947 which decreased to $ 1107 million. This drastic loss shown in the balance sheet of BP had destructed its brand image and stakeholders trust in the business functioning of organization. In addition to this, BP had contributed $ 500 million in its research and development department. BP needed to make improvisation in its value chain activities instead of making investment in its research and development department. This is clear to note that BP had failed to maintain effective value chain activities in Mexico country which resulted into Deep water Horizon oil spill. BP wanted to make increment in its brand image and goodwill in gulf country and for this it had made contributions of $ 360 million in six berms in Louisiana project (Gutierrez, et al. 2013)
Reflection On The Case of BP
The main argument could be made on the accounting and financial policies which were followed by BP. It is evaluated that BP had charged its capital expenditure as revenue expense which had reduced its overall profit. According to IFRS norms and regulations if company had charged its capital expenses as revenue expenses then it would decrease overall profit of company and reduce the tax burden. BP had followed wrong accounting policies and measure while formulating financial statement. These types of accounting practice reduce the overall profit of company and eventually will decrease the tax burden (King, et al. 2015). This analysis has also reflected that BP had not followed proper level of financial and accounting reporting frameworks. In addition to this, BP should put all of its money in escrow account in order to discharge all of its legal responsibilities. Furthermore, BP had prepared its consolidated financial statement as per the IFRS rules and accounting standards. By evaluating the consolidated financial statement, it is considered that BP had not disclosed proper financial and non financial statements in its annual report which had destructed its brand image in stakeholders mind. In addition to this, overall value of eco-system which have damaged due to the Deep water Horizon oil spill is USD 12 to 47 billion. Therefore, by considering these facts, it is evaluated that BP had become inefficient in disclosing required information to its stakeholder. Moreover, BP had also not followed proper level of domestic and international accounting reporting frameworks. If BP wanted to maintain an effective level of reporting frameworks then it should have followed all the rules and regulations of IFRS and AASB accounting norms (Bodle, et al. 2016).
This is noted that BP had failed to maintain effective value chain activities in Mexico country which resulted into Deep water Horizon oil spill. BP wanted to make increment in its brand image and goodwill in gulf country and for this it had made contributions of $ 360 million in six berms in Louisiana project. Moreover, after evaluating the financial statement of BP, it is considered that BP had not disclosed proper financial and non financial statements in its annual report. This has shown that BP had failed to follow IFRS and AASB rules and regulation and also failed to disclose material information to its stakeholders. This reflected that BP had to make changes in its reporting frameworks if it wants to make improvisation in its reporting frameworks. This will not only increase the transparency in its financial statement but also increase the brand image of company (Gutierrez, et al. 2013). On the other hand, BP had also charged its capital expenses as revenue expenses which have also reduced its tax burden. According to IFRS Norms Company needs to make proper classification of its expenses. BP had already made various losses which aroused from the Deep water Horizon oil spill. Therefore, in order to counter these negative losses BP should have paid all the penalties, fines and taxes amount for the betterment of society (Zhuang, 2016).
Conclusion
This case reflects all the negative impacts of accounting and financial reporting system. In this Deep water Horizon spill case, it is observed that BP had made investment in non productive eco- system. In addition to this, it has also failed to disclose all the required amount of information to its stakeholders. The management department of BP had come up with non effective financial implication in order to reduce the negative impact of Deep water Horizon spill case. After analyzing all these facts, it is observed that if BP wants to establish its brand image then it needs to pay off its all certain and uncertain liabilities and penalties for the betterment of society. It is required to overcome the negative impact of Deep water Horizon spill case more than earning profit from its business function. Now in the end, it would be inferred that BP should follow all the international and domestic reporting frameworks for better financial reporting and transparency in its financial and non financial materials. (Liu, et al. 2016).
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
Gutierrez, T., Singleton, D.R., Berry, D., Yang, T., Aitken, M.D. and Teske, A., 2013. Hydrocarbon-degrading bacteria enriched by the Deepwater Horizon oil spill identified by cultivation and DNA-SIP. The ISME journal, 7(11), p.2091.
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.
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.
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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