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ACC4284 Emerging Issues In Accounting and Finance L14000137

1.0 - Introduction

Organizations all around the world are now intend to meet the needs of business
sustainability towards future trends. A firm must start to enhance the company reputation in
order to increase the possibilities of acceptance from the society. However, due to an
integration happen in globalization now causes all over the world organizations had
concerned to focus towards the issue of social content in order to fulfil the impact of
maximizing economic performance and at the same time build shareholders satisfaction and
gain more wealth (Pava & Krausz, 1996). Nowadays, company could not specifically rely on
its local market and stay in a manner of continuous growth as it will only giving opportunity
to benefit other competitors to expand the idea, product and services to other markets beyond
you. To pursue the expectation of financial gain in a corporation, an act in a socially
responsible is crucial to evaluate the integration systems particularly in the area of social,
economic, political and environmental concerns; forcing companies to take into account the
observance of the law of global finance and focus the possibility extent to create good results
and contributed for the society and stakeholders in particular.Undoubtedly, many
organizations especially startups company are desire to going global. It is an extent where
international market does exists. Because of this existence of openly market was enable the
world economic and political system expand widely and many countries trying to implement
international market strategy, using several ways to enter into the market . Extract from the
definition of international market was defined as a dynamic market which relating to
exchange rates, foreign investment as well as global financial system that incur on how these
affect the markets as a whole including a study of future swaps. This is where globalization
has made not only allow a corporation focus on its local markets but also bring an
opportunity to expand its business into foreign markets (Ty Morse, 2013).

Taking business into global require some investment. The investment mentioned here is more
primarily in building relationship and making the effort in expanding your own market as
well as create new opportunities for business development. It is an essential for a corporation
to organize corporate social responsibility (CSR) to become one of the business strategic
nowadays. This is where the information could be delivered to the public the ideas, products
and services that the company had performed in order to stay closer with your stakeholders
and sustain the business significantly. In other words, CSR also defined as it associated to test
on whether the corporations did conduct their own duties to broader stakeholders and their
ACC4284 Emerging Issues In Accounting and Finance L14000137

ability to influence the communities in which they operates. Some of the proponents also
supported that the effectiveness functioning of CSR is related with global financial markets
that depend on socially responsible business that had conducted (Alessia & Florence, 2015).
Addition to that, part of the researchers had identified the social responsibility and financial
performance bring the role of good corporate governance both in leadership itself and in the
field of leadership development (Fernandez, 2015). Therefore, the fundamentals of CSR are
considered to be universal which reflect the globalization of business and economies in
maximizing shareholder value without regards to other stakeholders in currents global
environment today (Kim Kercher, 2007).

2.0 Overview of CSR activity

Movement aimed to practice the implementation of CSR activity is a business approach that
most of the company should contributed the needs from society and take more consideration
on the impact of their businesses including their own stakeholders and the environment. This
is typically as company voluntary to demonstrate and shift their focus on the interest of
society and basically this CSR activity are engage themselves in order to contribute back to
the society (Joshua, 2013). With regards to get further affairs towards the companys
sustainable success, it is in fact that businesses are responsible for their operations and
considering the impacts fall under the stakeholders. However, it is no longer acceptable for a
company to gain economy prosperity; instead of putting efforts to reshape their frameworks
and business models in order to recognize all over the world through integrating social,
environmental and ethical responsibilities into their businesss corporate governance in order
to attain the competitiveness and sustainability wealth in future trends. If a company pratices
a good governance, this is a great symptoms to show that the company had performed
effective CSR; which means that the company had build up an image of socially responsible
companies in achieving sustainable growth in their operations in long term basis and create
significant value that are preferred by their stakeholders (Joshua, 2013).

In contrary to that, companies may face some risks and challenges as they implement the
activity of CSR. It is sometimes due from the coporate political issues or organizational-level
differences are often embedded in culture. Different people obtain different behavior and the
difficulty in developing leadership are otherwise depends on an individual role of handling
the activity for a continuous global society on whether it gives a positive or negative change
with these leadership capabilities effects. Without a responsible leadership in common, it may
ACC4284 Emerging Issues In Accounting and Finance L14000137

happen dissatisfaction from their investors which may not align with the requirements needs
from its stakeholders who as a leader can listen and care for others as well as ultimately serve
them because it is a crucial need for their corporations impact on society and the natural
environment that beyond legal compliance and the liability of individuals to manage well in
commited to diversity, ethics and values (Howell and Avolio, 1992).

3.0 Benefits of Global finance

The need of financial markets transform were being the prosperity to all of the companies
desire and wish to looking forward to; because it is a better ways of investment to build up
the society network and at the same time enhance the productivity of capital goods through
the financial system that had conducted; which could channeling the funds flow into the
global markets and expand the businesses effectively (Jason, 2006). However, in the absence
of global finance system, it may face difficulty in particular for those company who wish to
increase the possibility of acceptance from the public and build up good reputation to the
society, but because of the scope for looking investors within the only existing market is
limited and are not feasible in producing more capital goods as well as generate more wealth
to contribute back to the consumers (Jason, 2006). Hence, global finance is advantageous for
welfare gain due to the presence of global open capital markets which allows the firms to
borrow more outsource funds as their capital investment and reallocate the output. There is
no doubt that, this is the best opportunity cost of finance to the firm itself in order to gain
more activity on its capital investment. This is where international finance exists and
globalization involved due to the facts it brings an integration of economies worldwide to
promote international trade in goods and services which allow the business of its company
gain benefits in obtaining lower cost through cross-border movement of information,
technology, people and activity of investment which other countries are advantageous too
(Robert.L, 2007). Anyhow, it actually benefits both parties of lenders and borrowers open a
business that operate through global finance system in a transparent, competitive and efficient
which enable global investors feel more trusted and confidence via diversification, thereby
facilitating economic growth to the business. (Schmukler, 2004).

As we know, international financial market always have several economic features,


something that help to resolve the intrinsic saving value that had arise in the absence of
financial institutions. It is indeed help to confer social benefits through the financial market
ACC4284 Emerging Issues In Accounting and Finance L14000137

features by extending the division of knowledge, particularly the division of labor that helps
shifting capital to the company and giving those who are capable in manage the strength of
the institutions and helping to reduce the uncertainty inherent in future-oriented in order to
provide liquidity to the investors who possess great return from its capital invested. Likewise,
those who may not have the knowledge of finance would either seeking through foresight or
risk-taking capabilities to manage the flow of investments and hence global finance allow the
division of labor to extend individually so that to be aligned with comparative advantage.
This is how global finance bring together savers and investors to invest their capital into the
right way which exert positive influence to the growth of real economy (Libertas, 2012). Not
only that, for some industries which seeking at certain times of their sustainable development,
market-based of financing would be advantageous.Looking at that, global finance is
beneficial in expand capital as the most efficient manner too.

In some extent, there is negative influence for some businesses owners to enter into global
finance especially for start-ups company and also those which obtain small capital in the
business may not have sufficient cost of capital to support them and boost their businesses
into outsource markets due to emerging trend of imbalances in trade as well as the financial
flows of capital may not allow them to move forward to success (Wyss, 2009). Likewise,
financial globalization may carry risks in short run basis especially currency risk and inflation
that would appear and its globalization can be due to the relation on financial crisis. This is
due to the impacts of different currency had been used within the individual countries,
whereby the realization loss and gain of the exchange rates are very important to consider in
the international market because this is how various economic factors help in making
international investment decisions. There are three market fundamentals which is integration,
liberalization followed by capital inflows. If these financial infrastructure did not properly put
in place will thus causes the health of financial system turn worsen and speculative attacks
will occur with capital outflows among all international investors. In order to remain
economic stay in strong phase, local markets need to be properly regulated and supervised so
that to face the international market imperfections (Sergio, 2004). In determining whether or
not investors investing money is safe with foreign debt securities are depends on the utilizing
of accounting standards as a factor where every countries should adopt.
ACC4284 Emerging Issues In Accounting and Finance L14000137

3.0 Global accounting standards and CSR activity

Corporate social responsibility activities is now become globalized in standards due to the
introduction of the existence in global convergence of International Financial Reporting
Standards (IFRS). The utilization of IFRS system is basically an important factors for
international finance. It actually require many countries to follow similar reporting systems
so as to help the trade in between buyers and sellers to achieve common ways of rules and
regulations and keep the balance intact in trading services due to the purpose of reduce trade
barriers. The adoption of global accounting standards is the most important advantage for
socially reporting to reach the comparability financial reporting due to different countries
especially multinational companies have different ways of corporate rules in preparing and
presented their financial reporting in common which make the overall reporting looks
complicated with each others and bring an obstacle to compare them. So, global accounting
standards would be easier for companies to prepare the financial statements in just one set of
rules and in the meantime investors also could understand based from the nature of IFRS that
provided are satisfied and make well thought to the investment decisions (John, 2013). Not
only that, globalization also support many companies to expand the business into global and
it helps to reduce barriers as global accounting standards encourage many companies using a
single set of rules to follow instead of keep two sets of books to comply with new countrys
statutory accounting requirements in particular. This will likely decrease the cost for
company by eliminating the need to duplicate accounting functions which could allow
increase in expansion opportunities for the business across border abroad (Peter.G, 2008). In
contrary to that, it also have some disadvantages for all countries to follow the one and only
standards (Ketz, 2004). According to critics of international accounting systems due to
different countries had different social and economic institutions respectively, the require
information that needed to be disclosed in the financial accounts may find difficult to
eliminate every singe transactions differently in international reporting standards (John.D,
2013).

The objectives to sustain the effectiveness of reporting is require to manage well in terms of
economic social and environmental issue that need to be considered which aimed to create
long-term initiatives for the business and its stakeholders. This is the main perspectives as a
business owner who are responsible in giving some efforts on its own corporate responsibility
reporting in order to drive through the process of improvement and reliability of reporting
ACC4284 Emerging Issues In Accounting and Finance L14000137

disclosure, as this is the authority require to manipulate and exercise the compliance within
the entire business activity. Needless to say that, effective sustainability reporting provides
tools to create awareness of the companys environmental objectives which use to cascade
the measurement of company performance as well as validate those objectives in favorably.
However, the best measurement for driving improvement of company performance are
basically refer to the standards form of common frameworks that the company had practices;
in which how the comparability advantage could support both internal and external
benchmark on non financial reporting that had taken in place. Based from the guideline itself,
it actually help the company to create value opportunity in which the organization did
achieved its financial goals that had derived from social environmentally responsible
products and practices. This could be challenging for the business owners to analyze the
possibilities of performance benchmark and establishing systematic stakeholder engagement
as well as eliminating the materialism that had processes in order to identify the measurement
of it. However, International accounting standards are simplifies as international investment
decisions (Shirin.R, 2009). Based from this assumptions, we could examine that investors can
compare the financial statements of the companies with international accounting board
standards, or any other international guidelines because global investors nowadays need
reliable, understandable and comparable information extract from any platform in which the
financial information provided could empower them to make better investment decisions
(Shirin.R, 2009). Without incurring any standards on it, the comparisons will becomes less
reliable; as the information that presented may not giving accurately information to the
investors whereas the adoption of the accounting standards has allowed stock-trading
exchanges to merge across continents and thus opened-up a range of new investment
opportunities to the public and this is where international open market incurred (David,
2017).

When considering the perspective of CSR activities in terms of accounting profession, it is


necessary a connection in between social reporting and accounting; but anyhow it may not be
seen that the total social responsibilities the company had contributed has not been properly
accounted because it sometimes could predict that it may not have a proper form of standards
specifically mentioned at present. But the observation had revealed that majority of the
annual report had disclosed its social and environment activity in their report. Like those
public listed company were require by Bursa Malaysia to disclose their CSR initiatives in
their annual financial report; for the purpose of review the emergence of CSR in the corporate
ACC4284 Emerging Issues In Accounting and Finance L14000137

environment in Malaysia (Companies Act, 2016). But somehow this had raise the question to
its concern whether the practices should be undertaken and disclosed in the financial
reporting; how would the corporation should communicated and delivered the companys
objectives to the public to enhance the possibilities of acceptance for their investment
decisions. Based from the research of Adams and Narayan, it is better indication ways for the
firm to establish the policies that speak to the broader stakeholders in community by
providing relevant information about CSR activities and the process of incorporating that had
practices to attempt by the company (Orhan Akisik,2011). In the view of the fact that whether
the requirement of CSR activities to be dislosed in the financial reporting are still under
discussed.

4.0 Conclusion

In the globalization world nowadays, sustainable development in CSR has often been
compartmentalized as an emerging issue particularly the responsibility of large companies as
a key concerned. Hence, sustainability and CSR are here to stay because CSR reporting has
become one of the business strategy which integrate to help the company; use to identify
what are the possibilities of its material issues, risks and opportunities that had been incurred.
Therefore, the impact on community become the main features whereby all over the
companies are more focuses to it as this is one of the best methods that can help to build a
companys with a positive image. The role of CSR in todays society are not only initiate
focusly the only market where they stay, the presence of open international market are
actually allow more enterprise to adopt more trade businesses with other countries that bring
more expansion and investment capital into their market. This is advantages for both
company and society to have more alternatives platform to do their business and attract more
investorss interest.

Even though international market is beneficial for all the companies but there is some
negative influence which may cause problems to the market itself. Economic risk would
obtain one of the influences which refers to the countrys economic conditions and policies.
If a firm wants to invest in that country should take consideration onto the economic
condition which may adversely affect a firms operations. Those who lead companies in
many different countries may face challenges in various dimensions of its economy because
economies are always unpredictable, a tremendous change in between that period will
shocked down the community reluctantly. Not only that, different countries have different
ACC4284 Emerging Issues In Accounting and Finance L14000137

language and customer preferences. So, culture risk also may cause problems even though the
cultures involved are pretty similar but it may still obtain difference preference in
determining the company. The product or services that they produce sometimes may not
accept by the society in other countries as compare to our own because the different cultures
and different preference taste does exists (Janice.E, 2011). In order to sustain development in
a diversify markets, building CSR activities across the boundaries should be considered based
from the risk that may incur in future.

Because of international market, more foreign investors are encourage to take part an
investment activity to invest all over the world companies which would improve the access to
the international financial markets and enhance the sustainability of investors confidence and
knowledge which may trigger an improvement in future investments. A noticeable advantage
for small business in adopting global accounting standards is that it allows foreign investors
to know what is the business model and business activity through the implementation of CSR
reporting where it is a usable tools to communicate with the community and deliver the
information to show a company that uses IFRS standards to display its financial performance
in a way that the disclosure information that they observe are accustomed to view such data
from companies in their own countries which could retrieve the confidence and trust from
investors to follow the financial growth of the companies. Somehow, the company
information may find difficult to disclose by following the domestic accounting standards due
to different social and economic institutions, political approaches as well as tax implications
laws and business practices are hard to achieved it.