Accounting Assignment : Corporate Reporting Manager

Question 1 Write a report to the Corporate Reporting Manager about two of the more prevalent theories used for evaluating social and environmental (sustainability) accounting are organisational legitimacy and stakeholder theory.Compare and contrast these two frameworks. Do these theories have any deficiencies in explaining the practice of social and environmental (sustainability) accounting? Question 2 Read the brief extract below from an article by Sue Mitchell entitled ‘Retailers face multibillion-dollar hit from proposed lease accounting changes’ on 22 April 2015: Brief extract: Retailers face multibillion-dollar hit from proposed lease accounting changes  By: Sue Mitchell Australia’s fastest growing retailers face a hit to their bottom line profits under proposed accounting rules that will force them to bring more than $40 billion worth of leases onto their balance sheets (Statement of Financial Positions) for the first time. Under the latest changes to lease accounting rules put forward by the IASB, retailers such as Woolworths, Wesfarmers, Myer, David Jones, JB Hi-Fi, Harvey Norman, Specialty Fashion and Premier Investments will have to calculate the net present value of future lease commitments and recognize them as debt on their balance sheets. Instead of recognizing rent payments as costs incurred, retailers will have to expense theoretical amortization and financing costs. According to a report by Morgan Stanley, the impact on retailers will be ‘considerable’, blowing out gearing levels and reducing return on capital employed, but will vary from retailer to retailer. KPMG audit partner Patricia Stebbens said the proposed changes would boost gearing ratios, forcing some companies to renegotiate debt covenants with bankers. SOURCE: Extract from ‘Retailers face multibillion-dollar hit from proposed lease accounting changes’ by Sue Mitchell, The Canberra Times, 22 April 2015.