Question

• Should accounting include more than monetary units? additional insights into how companies are attempting to meet the challenge of measuring and reporting their contributions to society, as well as their financial results, to stockholders are referenced. Discuss why a company's stockholders might be interested in its environmental and social performance. Next, determine the critical pieces of information companies are providing and why this information is important from the perspective of the different stakeholders.

Answer 1

The monetary unit emphasizes on entering and recording transactions which are expressed in monetary terms or in terms of a currency. Thus, a company cannot record entries involving the qualitative factors i.e the non-quantifiable items such as employee competence and skill levels, the quality of customer service, or the originality and resourcefulness and the ingenuity of the engineering staff. The whole concept of accounting in terms of monetary unit is based on the assumption that the currency would be relatively stable over a period of time which doesn’t stand true for most economies, thereby necessitating the restating of the financial statements consistently and on a regular basis.

Even though businesses can't record all the qualitative items, some of them will eventually have a monetary impact. There may be instances of sime important event (Eg a lawsuit )which could have a huge impact on the company. So, in order to ensure the accuracy of the financial information being presented, the company would want to disclose the lawsuit in the notes to the financial statements so the users of this information are aware that the company may have to pay an amount at some later date in the future. When the case comes up in court and there is a verdict, the company will know the outcome and the amount of any payment that they may have to make. At this point, the company would record the transaction as it can measure it in monetary terms

Though traditionally it is considered that a company’s only responsibility is to increase value for its shareholders. In line with this view, the key focus or aim of most companies, especially in the private sector, is to focus on increasing their profits. However, achieving this objective should not cause negative side effects for other stakeholders and society as a whole. Businesses form a part of society and depend on it to achieve their economic goals.

Companies in the current scenario are being encouraged by their shareholders and other stakeholders to not only boost the bottom line i.e focus on increasing the profits, but also to help address some of the country’s most challenging problems, including those pertaining to the economic development and the environment. The corporate stakeholders are demanding that companies recognize a broader scope of responsibility in addressing the issues relating to the social responsibility. Therefore the companies are increasingly working with stakeholders to understand their opinions and concerns on various environmental, social, corporate governance and economic issues (such issues are commonly called as corporate social responsibility issues) and to incorporate and address those opinions and concerns in the company’s strategic decision-making processes.

The critical pieces of information that companies are providing are as follows:

• .Shareholders—addressing and focusing on the company’s business model and corporate governance, including disclosing the role of the board in risk management, in sustainability reporting and in evaluating CSR performance.
• Employees—addressing diversity, health and safety, training and mentoring, employee relations, and wages and benefits.
• Customers—taking into consideration the customer service and privacy.
• Suppliers—addressing labor standards and whether suppliers are required to implement their own CSR programs.
• Communities—addressing corporate philanthropy and charitable contributions, community investment and the environmental impact of operations.
• Governments and Regulators—addressing lobbying, public policy and the effects of and compliance with environmental regulations.