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1. Vague definition
- Definition of asset and liabilities are rather vague and the recognition criteria
are couched in terms of probability which is subjective.
- Recognition criterion fails to offer any guidance on the measurement problem,
which is fundamental to accounting
- Definition is open-ended and it appears that any measure would be acceptable
as long as the cost or value can be reliably measure
2. Conceptual framework is intended as a fundamentally prescriptive project
- Aim is to provide guidance and prescriptions which is not based on observations
of current practice to practicing accountants on how to account for information
which is relevant for decision making
3. Do not resolve contemporary disclosure issue
- For deferred tax credits, treatment of costs of exploration in the oil and gas
industry and current value accounting
- Definition for liabilities is so general that we are unable to predict the boards
position on deferred tax.

What is the cost of mandatory reporting of social and environmental

Social and environmental reporting is the dissemination of information on the
interacting between the entity, society and the environment, including on
performance and management. There are costs of mandatory reporting of social
and environmental information. One of it will be the compliance costs that
incurred if mandatory reporting is imposed. If company is required to report on
social and environmental information, costs for resource allocation, pricing and
remediation of social and environmental impact will incurred. Company will
spend more money in dealing with the issues to ensure that their business did
not breach any rules and regulations set by the government.
Besides that, mandatory social and environmental reporting also runs the risk of
adding costs whilst undermining efficiency and competitiveness of company.
Introduction of different national level requirements and indicators will place a
tremendous burden on company that operates in an increasingly global business
environment. Company may change their business practices in accordance to
the regulations rather than acting the best interest of the stakeholders which is
to maximize their profit. Legitimacy theory also propose that entities with poor

environmental performance would more likely to produce greater levels or

higher quality environmental information to address potential legitimacy threats.
This would make the report not reliable as the company manipulate on how they
disclose their social and environmental information.

Would social and environmental information provide additional significant

information for users of annual reports?
Social and environmental reporting provides significant information on how
company deals with social and environmental issue while carrying out their
business practices to the users of annual reports. Annual reports users can be
shareholders, customers, employees, creditors and financial analysts.
Traditionally, while preparing annual report, company only focus on
shareholders interest which is to maximize profit. But now, company considers a
range of stakeholders in their decision making. One of it is that shareholders can
consider sustainability issues of the company in their investment decisions.
Shareholders are more likely to invest in a company that can sustain long term
rather than company that only focus on how to make profit without considering
on how their business practices impact on the environment. Presentation of the
information on annual report enables shareholders to specify the influence of
environmental and social aspects of business on performance and on financial
position of the company as well as to access the future risk connected with these
aspects. With these information provided by the company, shareholders are
better informed and can be more decisive on whether to invest in the company
or not.
Social and environmental reporting also provides significant information to
customers. Due to the recognition of climate change, customers nowadays are
concerned about the environment and they are more interested in the source of
products and actively seek for green and fair-trade products. Information
provided by the company that shows how well they produce their product
without harming the environment are more likely to attract customers to buy
their products.
It also provides greater information for creditors or banks. To decide whether to
provide fund to the company or not, financial institutions need to consider the
environmental impacts of project they fund in order to make sure that the
company has the credibility and capabilities to deliver on its commitments.