Background of the company
AGL energy is an Australian company which is listed in ASX stock exchange. It is a public sector company which is involved in retailing of electricity and energy generation for the household and commercial use. Currently the company has market capitalisation of 10.589B in AUD.
AGL limited has adopted Australian accounting standards and Corporations act 2001 for preparation of the financial statements of the parent entity. The financial statements is also compiled with IFRS (International Financial Reporting Standard). The annual report 2019 was disclosed according to the new standards of AASB 9 for preparing the financial instruments and AASB 15 for disclosing the revenue from contract from customers. Some of the accounting policies are:
The accounting of financial statements are done on the basis of AASB standards and compiled with IFRS standard for preparation of financial statement. The consolidated financial statement of the business has been prepared based on the historical cost method except some of the derivative equity and financial instrument. These are measured at fair value.
The information related to social and environmental factors of a business should be reported in accounting disclosure. The reporting for social and environmental issues is significant to the companies & their stakeholders. This is because an organisational sustainability depends on their responsibility towards the society. Therefore, it is very important for companies to understand these issues that can affect the business. Hence, accounting disclosure. Social and environmental information provides a transparent image related to sustainability of the business. Every business should implement social and environmental safety regulations and other reliability requirements to improve their environmental & social performance (Schaltegger and Burritt 2017). Environmental information is related to information related to environmental laws, environmental quality & environmental pollution in the organisation.
Accounting disclosure should be transparent because the customers nowadays are concerned more on organisational behaviour. They are more concerned on matters like human rights, ethical conduct of business, the business sustainability, the various laws & regulations of the business. They are more interested in understanding whether the business is positively contributing towards the society or not. They must publish the information related to environmental protection policies in the organisation (Lee et al. 2017). In addition to environmental information, social information should also be reported in accounting disclosure. Information related to the organisational behaviour towards their employees, any kind of anti-corruption activities inside the organisation and information related to the diversity policy of the organisation. The above non-financial information will also help the organisation in building their trust towards the society and gain a valuable reputation of the business in the community (Dumay and Guthrie 2017). This is because the integrated reporting properly describes the operating & functional units of the business which describes all the information. Hence, it is responsibility of the professional accountant to effectively organise, evaluate and present the information while performing the accounting disclosure procedure.
Therefore, it is very much important for a business to disclose issues related to their reputation, legal requirements necessary, issues related to pressure from economic and social factors. These information comprises of information related to the business activity and create a public image towards the business. This is because the characteristics and performance of a company will affect the shareholders, government, employees, customers and the entire community. These stakeholders have the right to gather environmental information related to the business. Information related to Corporate Social Responsibility will provide an outline of the company’s concern towards their social & environmental factors in addition to the business operations.
Accounting theories- The full disclosure principle of accounting theory an organisation should disclose all the relevant information which will be helpful for the users. The information should be in accordance to the economic reality of the organisation. A business must report all the necessary information related to a business that can be helpful by the users. The necessary information must include both the financial & non-financial information that is related to the business. Social and environmental information is one of such non-financial information that should be disclosed. According to this principle, it is very much important to disclose the all the business related information because, there could be a change for manipulation of important information of a business (Schroeder, Clark and Cathey 2019). Full disclosure of financial & non-financial information allows a firm to share their internal information to outside the world. Companies must publish the information related to environmental protection policies in the organisation. In addition to environmental information, social information should also be reported in accounting disclosure. Information related to the organisational behaviour towards their employees, any kind of anti-corruption activities inside the organisation and information related to the diversity policy of the organisation.
AGL limited company is committed to ensure a strong corporate governance framework. Their organisational policies & practices describes a strong corporate governance. Hence, they are focused on understanding the stakeholder’s expectations and well-being of the society. The Brett Redman is the Chief Executive Officer of the company. The board members is engaged in involving best practice in their corporate governance standards in order to support the sustainable performance of the business. The board is responsible for creating value for the company’s shareholders, customers, employees and the communities in which the company operates. The board is responsible for reviewing the strategic direction of the company. They are also responsible for guiding the company’s culture and monitoring the culture according the company policies and its values (Aslam et al. 2018). This includes monitoring of both the financial & non-financial risks of the business. Some of the risk includes environmental risks of the business activity, various safety risks related to the employees and other damages that can affect the company’s reputation.
Some of the responsibilities of AGL board are as follows:
Corporate Governance structure of the company
Task force on climate related financial disclosures has been promoted by AGL for the disclosure of any financial risks related to climate. This framework allows the market participants to effectively disclose the consistent information related to any kind of risk & responsibilities of the climate change. TCFD framework includes:
The company’s greenhouse gas policy, their transition plans and their risk management approach related to carbon has allowed the company to transit their business into low-carbon economy. TCFD framework has allowed the firm to assist their investors, stakeholders and other to properly understand how the company is managing their issues.
According to environmental report of AGL Energy Ltd 2019, the energy consumption information was disclosed according to national greenhouse act. The energy consumption rate of AGL Macquarie was generated from their acquisition. The Company’s water consumption was increased at their Camden Gas Project due to their irrigation activities. Wallumbilla water consumption has been used by the company to measure its actual water usage. The air emissions has been increased in the year 2019. This was increased due to increase in the fuel consumption. The air emission information of the company is measured in the nearest kilogram of Carbon monoxide. The factors used for air emission data are sourced from the techniques of industry emission. The air emissions includes emissions from Nitrogen oxides, particulate, emissions from particulates, emissions from sulphur dioxide and emissions from organic compounds (O’Kelly-Lynch et al. 2020). Organisational hazardous waste has been decreased in FY 2019. But, non-hazardous waste has been increased in 2019, this was due to the inclusion of water that has been produced at the Camden Gas project (Chavan et al. 2020). This has been used for recycling purpose. Other non-hazardous waste has been reduced in 2019, this was due to the disposal of coal ash at one of the site of AGL.
AGL limited uses various forms of capital and adopted the capital wisely for meeting the organisational needs. The different forms of capital used for driving the values are:
References
Agl.com.au. (2020). [online] Available at: https://www.agl.com.au/-/media/aglmedia/documents/about-agl/who-we-are/corporate-governance-policy/2019-corporate-governance-policy-080819.pdf?la=en&hash=EB368530909FA8B2706D7C5BFF7174AD [Accessed 12 May 2020].
Agl.com.au. (2020). [online] Available at: https://www.agl.com.au/-/media/aglmedia/documents/about-agl/investors/annual-reports/agl_annual_report_090819.pdf?la=en&hash=2890C67A39531E9197467BBC1F87B463 [Accessed 12 May 2020].
Aslam, S., Ahmad, M., Amin, S., Usman, M. and Arif, S., 2018. The impact of corporate governance and intellectual capital on firm’s performance and corporate social responsibility disclosure. Pakistan Journal of Commerce and Social Sciences (PJCSS), 12(1), pp.283-308.
Chavan, S.G., Maier, C., Alagoz, Y., Filipe, J.C., Warren, C.R., Lin, H., Jia, B., Loik, M.E., Cazzonelli, C.I., Chen, Z. and Ghannoum, O., 2020. Light Limited Photosynthesis under Energy-Saving Film Decreases Eggplant Yield.
Dietz, S., Garcia-Manas, C., Gardiner, D., Irwin, W., Lion, A., Nachmany, M., Rauis, B. and Sullivan, R., 2018. The state of transition in the coal mining, electricity and oil and gas sectors: TPI’s latest assessment. Transition Pathway Initiative.
Dumay, J. and Guthrie, J., 2017. Involuntary disclosure of intellectual capital: is it relevant?. Journal of Intellectual Capital.
Holloway, S.S., van Eijnatten, F.M., Romme, A.G.L. and Demerouti, E., 2016. Developing actionable knowledge on value crafting: a design science approach. Journal of Business Research, 69(5), pp.1639-1643.
Lee, E., Walker, M. and Zeng, C.C., 2017. Do Chinese state subsidies affect voluntary corporate social responsibility disclosure?. Journal of Accounting and Public Policy, 36(3), pp.179-200.
Miah, M.S., 2017. Accounting standards complexity, audit fees and financial analyst forecasts in Australia: a thesis submitted in fulfilment of the requirements for the degree of Doctor of Philosophy in Accounting at Massey University, Albany, New Zealand (Doctoral dissertation, Massey University).
Nwaiwu, J.N. and Joseph, B., 2018. Core Corporate Governance Structure and Financial Performance of Manufacturing Companies in Nigeria.
O’Kelly-Lynch, P.D., Gallagher, P.D., Borthwick, A.G., McKeogh, E.J. and Leahy, P.G., 2020. Offshore conversion of wind power to gaseous fuels: Feasibility study in a depleted gas field. Proceedings of the Institution of Mechanical Engineers, Part A: Journal of Power and Energy, 234(2), pp.226-236.
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues, concepts and practice. Routledge.
Schroeder, R.G., Clark, M.W. and Cathey, J.M., 2019. Financial accounting theory and analysis: text and cases. John Wiley & Sons.
Stadler, C. and Nobes, C.W., 2018. Accounting for government grants: Standard-setting and accounting choice. Journal of Accounting and Public Policy, 37(2), pp.113-129.
van Baarle, S., Dolmans, S.A., Bobelyn, A.S. and Romme, A.G.L., 2019. Beyond Command and Control: Tensions Arising From Empowerment Initiatives. Organization Studies, p.0170840618818600.
Xu, X.X., Zhang, M.Z., Zhang, H.Y. and Guo, S.M., 2016, August. Research on the Governance Structure and Corporate Performance of Listed Companies–Based on the Internal and External Governance Structure of the Company. In 2016 International Conference on Management Science and Management Innovation. Atlantis Press.
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