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This paper seeks to analyze the article “Emission Bell Tolls” by Agnes King (2009) and determine the basis for agreement or disagreement about Australian Accounting Standards and business.
In the said article, King (2009) was talking about the need for accuracy of reporting for the compulsory carbon emission reporting. There is the basis to agree with King for this part. Accounting information needs to be accurate or objective to be useful (Meigs and Meigs, 1995). She was worried about the schemes for carbon emission reporting and the complexity of which is expected to catch some companies out for accidental non-compliance.
She cited a warning also by senior chief financial officers that the absence of an international accounting standard for carbon emission could cause businesses to be forced to restate accounts two to three years down the track. She noted too about the pressure on the International Accounting Standards to release its draft on emission reporting since the said international standard around carbon trading would be crucial so that that equity analysis has to show how to value would be derived King (2009). It is the function of the standard to achieve accurate or reliable information to be useful.
It is feared if that the lack of consistency around the treatment of the costs of carbon would cause companies to come up with all sorts of strange valuations. She mentioned that effects could be in the form of hard-selling of stocks ell until they are cleared on clear on the issue of its reporting compliance with carbon reduction (King (2009). This researcher disagrees on this point since the absence of proper costing in the short run should not necessarily cause one to sell one’s investment. There are other ways of finding values of stocks like the dividend valuation model (Brigham and Houston, 2002)
It can be concluded that the use of accounting standards to factor in the cost of carbon reduction and as a cost of doing business would make accounting information more reliable and relevant that should result in better decision making with better chances for sustainability.
References
Brigham, E. and Houston, J. (2002) Fundamentals of Financial Management, London: Thomson South-Western.
King (2009). Emission Bell Tolls. Web.
Meigs, R, Meigs, W., & Meigs, M. (1995). Financial Accounting. New York: McGraw-Hill.
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