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1 Working Paper Series Environmental Financial Information and the Public Accounts and Estimates Committee of the Parliament of Victoria: Research Opportunities Jeffrey Faux PhD student, School of Accounting and Law ISSN No.WP 99/12 (November 1999)

2 Environmental Financial Information and the Public Accounts and Estimates Committee of the Parliament of Victoria: Research Opportunities Jeffrey Faux Department of Accounting and Law Victoria University of Technology ISSN No.WP 99/19 (November 1999) Jeffrey Faux is currently studying a PhD from the RMIT School of Accounting and Law. He can be contacted as follows: jeffrey.faux@vut.edu.au

3 Background In March 1998 the Public Accounts and Estimates Committee of the Parliament of Victoria released an Issues Paper (1998) on Environmental Accounting and Reporting therefore signalling the intention to conduct an inquiry. The main factor influencing the establishment of an inquiry was the National Strategy for Ecologically Sustainable Development (Forwood, W. 1998, pers. comm., 27 March). This particular strategy suggests that long and short term economic, social and equity issues (ibid.) should be integrated into the decision making and, therefore, reporting processes of public and private organizations. The terms of reference of the Inquiry into Environmental Accounting and Reporting were as follows: 1. Review and seek advice on international and national developments in environmental accounting and reporting; 2. Consider the current application of these developments for both private and public organizations in Australia and overseas; 3. Investigate the implications of these developments for Victorian public sector accounting and reporting; and, 4. Review the extent to which public and private sector organizations in Victoria and in Australia should be required to disclose information about the negative impacts of their activities on the environment and the positive outcomes of their efforts to protect the environment, control pollution and remediate environmental damage. (op.cit. 1998, pv) It was thought that the Inquiry may find some benefit in the preliminary findings of a research project being undertaken by the author as the findings represent the views of users of environmental reports. On that basis a submission was made to the Inquiry in July A request to give evidence before the Public Accounts and Estimates Committee s public hearing into environmental accounting and reporting was made in February The following report provides details of the submission and evidence given to the Inquiry. 1

4 Introduction The Inquiry process is an amalgamation of views on environmental accounting and reporting and reflects the input from the preparer of the Issues Paper (op. cit. 1998), committee researchers and those who make submissions and give evidence. Submissions and the giving of evidence therefore influence Government policy direction; quite a practical outcome for any research project. The issues addressed in this working paper provide a basis for future research projects by reflecting on the submission made, the questions asked by the Inquiry and the evidence given. The principal purpose in writing this working paper is to highlight research opportunities in environmental accounting and reporting and, therefore, it should be of interest to those considering a research project in this area. Aspects of the working paper are quite controversial for the express purpose of provoking research interest. It is not the intention to provide a verbatim account of the submission made to the Inquiry and the evidence given before the public hearing. Rather, only those areas of the submission that were questioned at the public hearing are discussed. The Environmental Accounting and Reporting Issues Paper (1998) provides an indication of the Committee s view of environmental accounting and reporting and it would appear that national accounts and accounting, a national economic perspective, is the direction of the committee s work. The research project being undertaken is on environmental accounting reporting needs of users from a financial accounting perspective. It would appear that a contribution could be made in terms of, how individual public or private sector entities might report about activities affecting the environment. (op.cit. 1998, p39) The following diagram depicts the stages in the development of environmental reporting from an accounting perspective. In the light of this diagram and considering the area of contribution, mentioned above, the research activities being undertaken may provide further insight into the exploration of user information needs, the establishment of formats and guidance for public environmental performance reporting. 2

5 Figure 1: Diagrammatic Representation of the Various Phases Involved in the Development of Environmental Reporting. 1. Exploration of stakeholder information needs / the role of accounting in providing environmental performance information 2. Identification of techniques to be used by an organisation to measure environmental performance (including design and implementation of systems and controls) 3. Establishment of formats / guidance for public environmental performance reporting 4. Establishment of guidelines in relation to the audit of environmental performance information (Deegan 1997) The results of a postal questionnaire sent to three user groups; shareholders, shareholders/environmentalists and environmentalists formed the basis of the submission made to the Inquiry. The views of the user groups on: a. the type of environmental information that users would like reported; b. the entities that should report environmental information; c. the favoured medium for being informed; d e f the preferred format of any report; the level of disclosure considered material; and, to whom environmental financial information should be addressed, has been specifically covered. After an explanation of the research method a discussion of the results of the survey and a commentary of the questions asked at the Inquiry and evidence given follows. 3

6 Research Method A postal questionnaire was thought to be the most appropriate method for gathering data given the nature of the problem and the constraints. A survey reaches, demographically and geographically, a more diverse group of respondents than would be available with other data-collection methods. The diversity of opinion was considered important because of the paucity of research in the area. The intention was to survey three groups; shareholders, environmentalists and shareholder/environmentalists. Shareholders are relatively easy to define as they hold shares, however, environmentalists cannot be so easily identified. A level of commitment was sought, similar to that of shareholders, and resulted in environmentalists being defined in terms of their membership of an environmental group, a professional environmental organization or being employed in an environmental occupation. Shareholder/environmentalists were expected to exhibit characteristics of both shareholders and environmentalists. Whilst it was theoretically possible to locate populations of the three categories the practicalities of identifying a group of shareholder/environmentalists proved quite difficult and, as a consequence, this group was identified from surveyed shareholders and environmentalists. Shareholders were randomly chosen from three Australian based companies listed in the top fifty companies of the Australian Stock Exchange (ASX). The rationale for this was that the vast majority of shareholders are represented in the top fifty companies. The companies from which participants were selected are; Australia & New Zealand Banking Group Limited (ANZ), Pacific Dunlop Limited (PDP) and ICI Australia Limited now Orica Limited (ICI). Surveyed environmentalists were drawn from the membership of the Environmental Institute of Australia (EIA). Participants were natural persons resident in Australia and over the age of eighteen. Organizations and companies, that formed a significant part of the databases mentioned above, were excluded when establishing mailing lists. There were 810 shareholder participants and 1072 environmental participants in the survey; a total of Responses have been categorized as eligible and ineligible. Participants below 18 years of age, deceased, too ill to participate, mail returned unopened or were overseas were deemed ineligible to participate. Eligible responses were further classified as valid, minimal use or invalid. Minimal use described those 4

7 responses that contained only the basic demographic information. Invalid responses contained no answers to questions but provided comments such as; the questionnaire was an invasion of privacy; or, the questionnaire could not be understood. The overall response rate was 57.9% (1088); further clarification can be gained from an inspection of Table 1. Table 1: Survey Response Rate Shareholders Shareholders & Environmentalists Environmentalists Total No. % No. % No. % No. % Surveyed Valid Minimal Info Invalid Eligible Ineligible Response Non-Response Total * *57.0 arrived by adding 12.5, 22.6 & 21.9 Results The results of the questionnaire are contained in the following tables that reflect the responses of users to the six specific areas mentioned in the introduction. The crosstabulation of the variables against the three user categories focuses on the similarities and differences between groups. a. Type of Environmental Information that Users Would Like Reported The type of environmental information and changing reporting needs created by the environmental agenda have been investigated and lists indicating the major themes of environmental disclosure have been constructed. The categories in Table 2 were developed from the foregoing and amendments were made to avoid any ambiguity respondents may have encountered. 5

8 Table 2: Ranking the Reporting of Environmental Events and Activities Event / Activity Shareholders Shareholders & Environmentalists No Rank No Rank Pollution reduction Environmental planning Compliance with regulations Site clean-up Environmental litigation Environmental health & safety Environmental research progs New product development Energy use Recycling Other Environmentalists No Rank The ranking of environmental activities and events most commonly disclosed has been undertaken to determine if differences exist across the groups. An inspection of Table 2 indicates that there is little difference between groups with the events and activities displayed in bold considered the most important in terms of reporting. b. Entities that Should Report Environmental Information The Australian Stock Exchange (ASX) groups companies into 23 sectors. Differentiating between sectors may have been difficult for some users and as a consequence alternative lists of sector categorizations from the environmental literature were investigated. Industry categories were adapted from earlier studies and included; chemical, iron and steel, paper, petroleum refinery, primary non-ferrous, and textiles. A recent Australian study by Deegan and Gordon (1995) indicated the industry sectors that were environmentally sensitive. Prior research examines the sensitivity of certain industry sectors rather than a more general approach to ascertain if differential reporting is considered appropriate by users. As a consequence changes to these lists of industries were made and appear in Table 3. Differential reporting has been canvassed by the US Environmental Protection Agency (EPA) through the idea of potentially responsible parties (PRP's). By identifying PRP s the number of companies required to comply with any regulatory requirements is reduced (Johnson 1993). Participants were asked to consider which industry sectors should report environmental financial information to ascertain whether differential reporting was appropriate. The results are displayed in Table 3. Shareholders ranking of sectors 6

9 Table 3: Information Industries Which Should Report Environmental Financial Industries Shareholders Shareholders & Environmentalists Environmentalists No. Rank No. Rank No. Rank Food & Beverage Developers & Builders Chemical Natural Resources Paper & Packaging Retail Oil & Gas Engineering Finance & Insurance Other tends to support the notion of differential reporting. Results from the shareholder/environmentalists and environmentalists groups indicate that respondents did not clearly rank the industry sectors which further indicates that these groups believe that all sectors should report. c. Favoured Medium for Being Informed The categories in Table 4 were based on the study by Chang & Most (1981). Adaptation to an Australian context took into account the work of Anderson (1981) and Anderson & Epstein (1995). As one of the target user groups for this project included environmentalists, adjustments to the sources of information were made to reflect the changed agenda. Prior researchers considered only the needs of specific groups such as shareholders, security analysts and creditors. A survey of environmentalists necessitates the inclusion of other sources of information that prior researchers would not have thought necessary. The ranking of sharebrokers, newspapers and magazines, and the annual reports 7

10 Table 4: Sources of Information Information Source Shareholders Shareholders & Environmentalists Environmentalists No. Rank No. Rank No. Rank Sharebrokers Financial Advisory Services Environmental Organisations Ethical Investment Organs Annual Reports Newspapers etc. Financial Newspapers etc. - General Newspapers etc. - Environ Company Announcements Advise of Friends & Relatives Tips & Rumours Government Agencies Other are consistent with earlier studies in the USA, NZ and Australia reported by Courtis (1978) and the more recent study by Epstein and Anderson (1995). The different ranking of the annual report by shareholder/environmentalists and environmentalists, the former ranking annual reports second and the latter ranking them first, is an interesting outcome. Tilt (1994), when investigating the effect of pressure groups on social disclosures, also observed that the annual report was ranked first by 61% of respondents. The question did not seek information about the types of decisions that may be made with the various sources of information. Respondents were left to ponder the sources and the types of decisions they might make with the information. It is interesting that annual reports of entities are considered the most important source of information by environmentalists. d. Preferred Report Format Various researchers have conducted content analyses of the disclosures made by companies in their annual reports and, whilst not being directly related, these studies form the basis for the variety of formats used to disclose environmental events and activities. Trotman (1979), used monetary and non-monetary quantification and no quantification as the categories of a study investigating the content of social responsibility disclosures by Australian companies. Guthrie & Parker (1990), described disclosures as declarative, representing non-quantitative disclosures, and quantitative disclosures as being monetary and non-monetary. Further, Gibson and O'Donovan (1994) categorised information in reports as financial information, 8

11 quantified non-financial information and, descriptive, or narrative information. Gray et al (1995b), adopted the categories used by Guthrie & Parker (op. cit.), monetary, non-monetary quantitative and declarative. The shared meanings as discussed by Gray et al (op. cit.) have greater implications when users of reports are considered. If semantic differences can be identified between the descriptions offered by researchers and accountants who, presumably, are familiar with accounting jargon, then the situation is magnified when considering the diversity of opinion, meaning and understanding of users. After evaluating the above terms and issues the following display classification was established; monetary, statistical, narrative and pictorial. The display choices are not the same and there is a certain order of generality in conveying information. Monetary or statistical displays can be quite technical and specific, whilst a pictorial display may cover statistical and monetary information but is designed to have a dramatic impact on the user. Narrative displays can also include monetary and statistical information in a technical fashion but with less precision than the monetary or statistical displays. The preferred method of display will depend on a number of variables, weighted differently by various users, because individuals interpret information differently. As a consequence, users, taking into account issues discussed earlier, make different decisions with the same information. Effective communication should maximize the decision usefulness of information transfer through the display medium. Further, the display preference of users should be of significant interest to accountants. Results regarding presentation formats, discussed earlier, are quite compelling. Respondents were asked for the type of information predominantly used when making decisions and, as a consequence, respondents that indicated more than one choice were deemed to have answered the question incorrectly. Hence, the large percentage of incorrectly answered. The overwhelming response of the incorrectly answered was to tick all categories. Whilst a third of shareholders would prefer a narrative format, when 9

12 Table 5: Preferred Reporting Formats Information Type Shareholders Shareholders & Environmentalists Environmentalists Total No. % No. % No. % No. % Monetary Statistical Narrative Pictorial Other Incorrectly Answered Total considering the responses of shareholder/environmentalists and environmentalists this rises to nearly half. This is quite important and perhaps the drafting of any reporting regulations should take this aspect into account. The question was framed so that it did not relate specifically to an environmental report and as a result has implications for the way in which accountants format other reports. e. The Level of Disclosure Considered Material Materiality is one of those accounting concepts that can confuse most users. The concept deals with relevance to decisions and as such its application is not uniform. Accountants have established three monetary benchmarks to allow for the practical application of what may be considered material. The benchmarks are: a. 1-5% of profit and loss or balance sheet items not material; b. 6-9% of profit and loss or balance sheet items may be material (subjective evaluation); and, c. 10 % above of profit and loss or balance sheet items are material. An inspection of Table 6 reveals that 47.2 % of respondents feel that disclosure of environmental assets, liabilities, revenues and expenses should be 3% or less. Interpretation of this information is a complex task but may indicate the difficulty of placing monetary valuations on environmental events particularly when dealing with bio-diversity. Given the relatively high percentage of incorrectly answered it may also indicate misunderstanding of the difficulty in displaying events of a 0-3% magnitude. 10

13 Table 6: Expenses Materiality of Environmental Assets, Liabilities, Revenues and Materiality of Disclosures Shareholders Shareholders & Environmentalists Environmentalists Total No. % No. % No. % No. % 0 to 3% to 6 % to 9 % Greater than 10% Should not be Disclosed Incorrectly Answered Total Recording contingencies presents the problem of determining when, if ever, an event may be attributable to an entity. Comparing the results in Table 7 with Table 6 indicates that respondents feel that disclosure of potential events is nearly as important for decision purposes as disclosure of actual events. In either circumstance, the benchmarks set by the profession appear not to correspond with the desires of users. Further testing in a decision scenario should provide additional information as to the effectiveness of the chosen benchmarks. Table 7: Potential Materiality of Environmental Assets, Liabilities, Revenues and Expenses Materiality of Potential Disclosures Shareholders Shareholders & Environmentalists Environmentalists Total No. % No. % No. % No. % 0 to 3% to 6 % to 9 % Greater than 10% Should not be Disclosed Incorrectly Answered Total g. To Whom Should Environmental Information be Addressed? Respondents were asked their opinions as to whom they believed information regarding an entity s environmental activities should be addressed. Five categories were indicated and respondents could choose more than one. Table 8 displays user expectations of who will use environmental information. Respondents believe that reports should be addressed to the public. Shareholders indicated their second user category to be shareholders/creditors whilst there was little difference between the 11

14 second choice of shareholders/environmentalists and environmentalists. respondents rated future shareholders/creditors as the group least likely to use environmental information. Table 8: User Expectations of Who Will Use Environmental Information User Groups Shareholders Shareholders & Environmentalists Environmentalists Total No. % No. % No. % No. % Shareholder / Creditors Future S/holders / Creditors Advisors Regulators Public Total h. Summary of Results All Differences between the user groups can be identified in the following summaries of the typical user. The modal response was used for categories across user groups to determine what was considered typical. A typical shareholder would like environmental reports: Focusing on pollution reduction and environmental planning; Reported by the chemical and oil and gas sectors; Reported in financial newspapers and magazines; Presented in a monetary format; Disclosing environmental information of magnitude 0-3%; and, For use by the general public. A typical shareholder/environmentalist would like environmental reports: Focusing on pollution reduction and environmental planning; Reported by all sectors; Reported in financial newspapers and magazines; Presented in a narrative format; Disclosing environmental information of magnitude 0-3%; and, 12

15 For use by the general public. A typical environmentalist would like environmental reports: Focusing on pollution reduction and environmental planning; Reported by all sectors; Reported in the annual reports of entities; Presented in a narrative format; Disclosing environmental information of magnitude 0-3%; and, For use by the general public. Whilst the findings about the sources of information and types of environmental information are supported by other research there is a divergence of opinion as regards differential reporting. Shareholders view differential reporting as an option whilst shareholder/environmentalists and environmentalists believe that all companies should disclose their environmental activities. The most significant finding is in regard to narrative display formats with the majority of users indicating this to be the format most preferred. Further research needs to take place in this area to test the usefulness of the various display choices in a decision context rather than represent a wish list of the information that users want. The findings provide information that indicates that the accounting profession needs to re-visit concepts of materiality and offer reports to the general public. Commentary In the discussion that follows the questions and responses made at the Inquiry are provided with editorial comment. Some questions and responses have been modified to improve flow and understanding. Editorial comments have not been made on all questions and responses but are after-the-event reflections. Question What is your view on implementing environmental accounting and importing it into Victoria and Australia? Is it realistic that regulation could take place through existing accounting standards? 13

16 Response The pluralist functionality of reporting entities is not addressed by existing accounting standards. The work of the Australian Accounting Research Foundation (AARF) is predominantly focused on regulating the reporting of the economic performance of the entity for the benefit of explicit users who have property rights or some fiduciary connection. To report environmental financial information to those users without property rights or a fiduciary connection, implicit users, perhaps a re-defining of certain terms and a consideration of alternative displays will be necessary. Preliminary results from the research being undertaken indicate a preference for narrative displays by users. Question Would narrative display be disclosed as part of existing standards, such as those concerned with materiality or contingent liabilities, or a new accounting standard? Response Materiality is a confusing concept... There are guidelines in accounting standards that point to what is considered material. However, respondents to the survey indicate the inappropriateness of these guidelines. This could be because respondents may not have understood the questions posed concerning materiality... The expectation of respondents was for lower levels of environmental disclosure than present guidelines suggest. If notions of materiality are less than previously accepted then consideration must be given to changing the guidelines to reflect user demand. Perhaps the regulatory purpose conflicts with the stated aims of regulators to provide decision useful information. There is little difference in how respondents view the disclosure of assets and liabilities, and contingencies. This indicates the importance of contingencies in decision making. Question If aspects of materiality and contingent liabilities are insufficient to meet user needs do regulators need to produce a new set of environmental standards for accountants to work with? 14

17 Response The emphasis of the regulatory framework is not balanced and reflects only partially the view of entity function that users perceive. Question Would you support voluntary or mandatory reporting of environmental information? Response Research evidence suggests that voluntary disclosures reflect positively the activities of an entity... Perhaps the choice is not only between voluntary or mandatory disclosure but could include a third alternative that of audited disclosures. The weakest alternative is voluntary disclosure. The concern is that environmental audits are not necessarily being performed by accountants. The accounting profession has an audit tradition and should be heavily involved in the new process to ensure audit reliability. Question Are there environmental or other qualified groups that could perform the audit function? Response The accounting profession has the experience to maintain the integrity of an audit process. An audit is usually performed by a team and an environmental audit team would include experts from other professions. In this way an audit team would benefit from interdisciplinary expertise. Question How would you quantify the social performance of an entity? 15

18 Response There are other ways to disclose information than in dollar or statistical form. The research being undertaken indicates a strong preference for narrative disclosure. Question What do you think of the notion of a triple bottom line? Response Users have trouble understanding accounting disclosures as they are at present. The introduction of triple-bottom-line reporting would serve merely to confuse understanding. Attempts were made in the seventies to introduce alternative measurement systems such as current cost accounting and continuously contemporary accounting both claimed to be superior to historical cost for decision making purposes. These attempts failed due mainly to users inability to understand the new systems or comprehend the problems with historical cost. The incapacity of users to understand accounting would only be compounded if a triple bottom line were to be introduced. Editorial There are several different names given to the notion of a triple bottom line such as multi-faceted reporting. The simple approach of identifying economic and social performance reports would probably be the easiest for users to understand. Question A discussion of the environmental accounting and reporting needs of users from a financial accounting perspective is in the submission. Could you explain what is meant by terms used? Response Financial information is considered to be that information which contributes to the decisions of users. For example, a shareholder may use a narrative disclosure 16

19 regarding the environment to make decisions about whether to buy, sell, or hold shares in a particular entity. Environmentalists may use statistical information to make their decisions. Users may not use traditional financial disclosure, that is, monetary disclosures, to make decisions. Question So you are discovering that different users of information have different needs, and would like to see it presented in different ways? Response Users have been classified as either explicit or implicit which is different from the classification in SAC 2. Explicit user describes those users that have property rights or a specific fiduciary connection with an entity. Explicit users have primarily an economic association, that is, a more traditional relationship. Implicit users do not have the traditional associations but consider that entities are accountable to the broader community for actions affecting, for instance, the environment. Statement/Question You are finding that different groups of people want different sorts of information presented in different ways. Doesn t that create a significant problem for anybody trying to produce some standard by which there can be meaningful reporting? Forget about dollar figures, and just talk about standards, whether determined by ISO, internally developed, or whatever. Response The intention of the research is to discover which style of format users, explicit and implicit, favour. Preliminary results indicate that narrative disclosures are preferred. Question But users would prefer narrative disclosures to be capable of being audited, wouldn t they? 17

20 Response It is difficult to audit narrative disclosures because of semantic difference and understanding. However, at present standards are in narrative form and are interpreted in a monetary context. Statement/Question If a standard is measurable in monetary or narrative form then it should be capable of being independently verified by a certified verifier therefore bringing rigour to the system. How do you grapple with setting standards? Response Quite a lot of work is being undertaken on the different meanings of some of the quantifiable phrases used in accounting standards.. Shying (1997) is considering terms such virtually certain and more likely than less likely and what they mean in terms of probability. Statement/Question In an earlier response you indicated that, for instance, statistical information regarding tonnes from the atmosphere into the river, could be environmental financial information because people would use it in making decisions that relate to finance, such as whether to buy, hold or sell. Having understood that, I move to whether you believe that sort of information should become compulsory, whether we should encourage companies to add that sort of statistical information, which is non-dollar statistical information, into an annual report or whether there should be a separate environmental report. Do you have a view on that? Response It is interesting that shareholders read annual reports only as second or third choice. People who read annual reports are implicit users environmentalists. Other research supports this outcome and as a consequence environmental financial information should be included as part of the annual report. 18

21 Statement/Question Yet we spoke to a professor of accounting who said annual reports should not be clogged up with other information of a non-financial nature and that the accountant s job is to get the dollars, the bottom line upon which you make decisions relating to capital. He said that decisions about social or environmental issues should be kept separate and that reports should not be clogged up with meaningless information. You do not agree with that? Response No, separate reports would cost companies significantly more and the research indicates that implicit users prefer to see environmental financial information in the annual report. The information is fairly superficial but that is where users would prefer to read about the environmental activities of an entity. Question There are superannuation funds and groups of shareholders looking at buying environmentally friendly companies that is, green companies. Will that trend happen in Australia? What is your view? Response Tippet (1997 ) considered the investment strategies of groups and organisations such as the Salvation Army and found an incidental ethical influence on investment strategy.. In attempting to determine populations from which samples could be established, other than several trusts based in Canberra, a middle group of users representing the views of both shareholders and environmentalists could not be found. Editorial The shareholder/environmentalist does not appear to be organised as many would suggest. There are green investment trusts but they are relatively small. It is also particularly difficult because of the diversity of most public companies for trusts to claim they are investing in green companies. 19

22 Question If we cannot demonstrate to shareholders the cost benefits of companies being environmentally responsible, how can the financial benefits be demonstrated to companies? Response It is difficult to answer a question of this nature simply. It is basic economics. If these companies do not have a positive environmental agenda then generating investment and interest in company pursuits may be difficult. Editorial The difficulty in answering the question comes from the point that it is the wrong question. It presupposes that shareholders and companies identify purely with an economic role for the entity which may not be the case. Statement The reason for the question is that there are obvious advantages and disadvantages to companies in making investments based on certain reasons and incentives, and obviously reduced costs would be one such reason, as would efficiency or marketing opportunities. Response Marketing opportunities stemming from being green are fairly superficial. Governments could play a substantial role in reducing costs by making it more attractive for companies to produce recycled products by reviewing regulations. Thoughts and Conclusions The present regulatory framework is administered through the Australian Stock Exchange listing requirements; the Australian Securities and Investment Commission corporate law and Australian Accounting Standards Board (AASB) accounting standards; and the professional bodies sponsorship of the AARF which produces the Australian Accounting Standards for the Public Sector Accounting Standards Board 20

23 and the AASB. A perusal of this structure indicates little or no involvement of state governments and provides little or no environmental financial information. The thrust of the Inquiry, therefore, is quite unique in that it indicates that the Victorian Government is contemplating regulating public and private sector disclosures of environmental financial information. It is only in recent times that state governments passed the regulation of financial disclosures over to federal bodies so for them to be considering re-entering the financial regulating arena is interesting in itself but more so when the issue necessitating the re-entry is environmental financial disclosures. The other interesting impression stemming from the Inquiry is an understanding of users inability to comprehend financial disclosures. Any regulation concerning environmental financial disclosures would take into account implicit user needs. However, the inquiry identified the need for any disclosure to be capable of verification. In other words, disclosures should be audited. If, as the research indicates, users, and implicit users in particular, would prefer narrative disclosures, then issues of audit are raised. Considering research being undertaken into the understanding of certain quantifiable terms used in accounting standards the applicability to audited disclosures has the potential to be a rich source of future research questions. 21

24 References Anderson, R., The Usefulness of Annual Reports, In J. Courtis (ed.). Communication via Annual Reports, AFM Exploratory Series No. 11: Anderson, R. and M. Epstein, The Usefulness of Annual Reports, Australian Accountant, (April): Bebbington, J., R. Gray, I. Thomson and D. Walters, Accountants' Attitudes and Environmentally-Sensitive Accounting, Accounting and Business Research, 24(94): Chang, L. and K. Most, The Use of Annual Reports: An International Study, In J. Courtis (ed.). Communication via Annual Reports, AFM Exploratory Series No. 11: Deegan, C., Giving the Green Light, Charter, 68(7): Deegan, C. and B. Gordon, A Study of the Environmental Disclosure Practices of Australian Corporations, Research Paper Series, 11/95b, Victoria University of Technology, Melbourne. Gibson, K. and G. O'Donovan, Green Accounting in Australia: Myth or Reality? Accounting Association of Australia and New Zealand Annual Conference, Wollongong. Gray, R., R. Kouhy and S. Lavers, 1995a. Corporate Social and Environmental Reporting: A Review of the Literature and a Longitudinal Study of UK Disclosure, Accounting, Auditing & Accountability Journal, 8(2): Gray, R., R. Kouhy and S. Lavers, 1995b. Methodological Themes: Constructing a Research Database of Social and Environmental Reporting by UK Companies, Accounting, Auditing & Accountability Journal, 8(2): Guthrie, J. and L. Parker, Corporate Social Disclosure Practice: A Comparative International Analysis, Advances in Public Interest Accounting, 3: Hainsworth, A., The Green Gap, Charter, 67(10):

25 Johnson, L., Research on Environmental Reporting, Accounting Horizons, 7(3): Lewis, N., N. Mangos and C. Tilt, A Review of Environmental Accounting, Australian Society of Certified Practising Accountants, Melbourne. Mahapatra, S., Investor Reaction to a Corporate Social Accounting, Journal of Business Finance & Accounting, 11(1): Owen, D., R. Gray and J. Bebbington, Green Accounting: Cosmetic Irrelevance or Radical Agenda for Change? Asia-Pacific Journal of Accounting, 4(2): Shying, M. 1997, Unknown, Ninth Asian-Pacific Conference on International Accounting Issues, Bangkok, Thailand. Tilt, C., The Influence of External Pressure Groups on Corporate Social Disclosure: Some Empirical Evidence, Accounting, Auditing & Accountability Journal, 7(4): Tippett, J. 1997, Unknown, PhD Symposium RMIT University, Melbourne, Australia. Trotman, K., Social Responsibility Disclosures by Australian Companies, The Chartered Accountant in Australia, (Mar): Victoria, Parliament 1998, Public Accounts and Estimates Committee Inquiry into Environmental Accounting and Reporting, Issues Paper No. 3 (prepared by, Prof. R. G. Walker), Melbourne. Victoria, Parliament 1999, Public Accounts and Estimates Committee Inquiry into Environmental Accounting and Reporting, Public Hearing 15 February, vol.?, p.?, Melbourne. 23

26 Other RMIT Business Working Papers 1992 Barrett, M., Strategic Implications of International Countertrade, WP 92/01. Thandi, H.S., A Case for Increasing Australian Trade with Malaysia, WP 92/02. Thandi, H.S., Some Conceptual Designs to Facilitate the Generation and Integration of International Trade Research, WP 92/03. Thandi, H.S., Malaysian Macrolights for the Investor, WP 92/04. Thandi, H.S., NAFTA - Boon or Bane?: Some Initial Reactions, WP 92/ Thandi, H.S., Self Disclosure Perceptions Among Students of Management, WP 93/01. Thandi, H.S., Competitive Directions for Australia, WP 93/02. Thandi, H.S., Culture-Strategy Integration in the Management of Corporate Strategy, WP 93/03. Subanidja, S. & Thandi, H.S., Logistical Implications of Surplus Rice in Indonesia - A Historical Perspective, WP 93/04. Wu, C.L., On Producer's Surplus, WP 93/05. Jackson, M., Unauthorised Release of Government Information, WP 93/06. Jackson, M., Incidence of Computer Misuse - Fact or Fiction?, WP 93/07. Beaumont, N., The Use of an Automated Storage and Retrieval System (AS/RS) at the State Library of Victoria, WP 93/08. Morley, C., An Experiment to Investigate the Effect of Prices on Tourism Demand, WP 93/09. Morley, C., Analysis of Experimental Data on Individual's Choice of Destination, WP 93/10. Morley, C., The Use of CPI for Tourism Prices in Demand Modelling, WP 93/11. Ainworth, M., The Value of Management Education: Views of Graduates on the Benefits of Doing an MBA, WP 93/12. Vitols, M., Some Criticisms of the Health Capital Model: Responses to Symptoms, WP 93/13. Marks, L., Marketing and the Public Sector Library: Some Unresolved Issues, WP 93/14. Jackson, M., Protection of the Proprietary Information of Organisations in the Asia-Pacific Region, WP 93/ Morley, C., A Comparison of Three Methods for Estimating Tourism Demand Models, WP 94/01. Mottram, K., Management Coaching Process, WP 94/02. Wright, K. & Benito, M.A., Sales Remuneration: Some Sins of Omission and Commission, WP 94/03. Morley, C., Beyond the MBA: Professional Doctorates in Business, WP 94/ Morley, C., Tourism Demand: Characteristics, Segmentation and Aggregation, WP 95/01. Morley, C., Data Bias in the Estimation of Airfare Elasticities, WP 95/02. Morley, C., Estimating Tourism Demand Models, WP 95/03. Jackson, M. & Bos, A., The Effect of Management Education on Women's' Careers: The RMIT Experience, WP 95/04. Callaghan, B. & Jackson, M., Accounting Professionals: Current Attitudes to Banks, WP 95/05. Jackson, M. & O'Connor, R., Research Planning and Management in Non-traditional Research Discipline Areas, WP 95/06. Callaghan, B. & Dunwoodie, K., How Large Are Cultural Values Differences in the 90's?, WP 95/07. Morley, C. & Willis, Q.F., Managerial Theory and Economic Rationalism: An Argument in Response to Karpin, WP 95/08.

27 Morley, C., Diffusion Models of Tourism: International Tourism to Australia, WP 95/ Scarlett, B., An Enterprise Management Understanding of Social Differentiation, WP 96/1. Slade, P., Technological Change in New Zealand Sawmilling, WP 96/2. Mathews, C. & Davey, B., The Collection and Analysis of Environmental Information in the Top 150 Australian Companies: Some Preliminary Results, WP 96/3. Kangsanant, V., The Commercialisation of New High Technology Products by Small Firms in the Information Technology Industry, WP 96/4. Slade, P., Employment Relations: New Paradigm or Old Ideology, WP 96/ Jackson, M. & O Connor, R., Staff Mobility Programs in Australian Universities, WP 97/1. Morley, C.L., An Econometric-Product Growth Model of Tourism to Australia, WP 97/2. Callaghan, W.M. & Dunwoodie, K., A Comparison of Decision Making Approaches used by Australian and Malaysian Managers, WP 97/3. Martin, W.J. & Chishti, M.A., Content and Context in Information Management: The Experience of Two Melbourne-Based Organisations, WP 97/4. Chishti, M.A., Martin, W.J. and Jacoby, J., Information Technology Enabled Organisational Change: A Survey of Australian Practices, WP 97/5. Scarlet, B., Beyond Excellence: In Search of Enterprise Effectiveness, WP 97/6. O Neill, M., Bellamy, S., Jackson, M. and Morley, C., An Analysis of Female Participation and Progression in the Accounting Profession in Australia, WP 97/7 Holian, R. & Martin, S., Ethical Issues and Decision Making in Organisations, WP 97/ Scarlett, B.L., Business Goals, WP 98/1. Scarlett, B.L., A Typology of Enterprise Effectiveness Models, WP 98/2. Lombardo, R.W., Unravelling the Mysteries of Ellwood s Basic Mortgage Equity Capitalisation Model, WP 98/3. Woolley, R.L., International Accounting Standards and Economic Growth: An Empirical Investigation of their Relationship in Asia, WP 98/4. Caddick, M., Moore, S. & Management Research Team, Adding Value: Using Customer Feedback: An Exploratory Research Project Examining the Use of Customer Feedback by Victorian Local Government Organisations, WP 98/ Scarlett, B.L., A Cross Cultural Comparison of Business Goals, WP 99/1. Parratt, E. & Holian, R., ISO 9000 Certification: Is it worth it?, WP 99/2. Morley, C., Estimating Integrated Time Series and Other Problems in Modelling Tourism Demand, WP 3/99. Morley, C., How Professional? The Role of the University in Professional Doctorates, WP 4/99. Ellingworth, R., When the Will to Change is not Enough? An Action Research Case Study from the Finance Industry, WP 5/99. Boucher, C., Leaders with Disabilities: Still a Splendid Deception, WP 6/99. Boucher, C. & Gardner, I., Beyond Male Stereotypes in Management Practice, WP 7/99. Boucher, C., A Description of Modernism and Postmodernism in the Context of Organisation Studies and Thinking about Management, WP 8/99. Kimber, D., Values Based Strategies and Planning for Global Organisations, WP 9/99. Watty, K., & Terzioglu, B., Performance Measures Employed by Australian Subsidiaries of US Service Multinational Companies: An Empirical Survey, WP 99/10.

28 Scarlett, B.L, A Delphi Study of the Business Goals of Australian Stockbrocking Firms, WP 99/11. Faux, J., Environmental Financial Information and the Public Accounts and Estimates Committee of the Parliament of Victoria: Research Opportunities, WP 99/12. Gill, C., Use of Hard and Soft Models of HRM to Illustrate the Gap Between Rhetoric and Reality in Workforce Management, WP 99/13. Steiner, C., Unifying Research and Practice Through Concrete, Personal Knowing, WP 99/14. Steiner, C., How Important is Professionalism in Public Relations Management?, WP 99/15. Steiner, C., Educating Science Workers for an Innovating Work Environment, WP 99/16. Steiner, C., & Black, L., Australian PR Professionals in Corporate Strategic Planning: Educational Implications, WP 99/17. Sheldrake, P., & Hurley, J., The Good Manager in a World of Change, WP 99/18. Paderno, F., A Study of Art and Design Small Business Practices to Determine the Attributes needed for Operating a Successful Small Business, WP 99/19. O Shannassy, T., Lessons from the Evolution of the Strategy Paradigm, WP 99/20. O Shannassy, T., Strategic Thinking: A Continuum of Views and Conceptualisations WP 99/21.

29 Further copies of this working paper and others in the series are available from: Research Development Unit RMIT Business GPO Box 2476V Melbourne Vic 3001 Ph: Fx: Web: