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Accounting Theory: Market Response

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Question: Describe about the Accounting Theory for Market Response.   Answer: Introduction Oil spills are very known to be very common these days and in relation to UK, the biggest known oil spill was the BP oil spill that was also called as Deepwater Horizon oil spill. In the Gulf of Mexico, there was an explosion of the Deepwater Horizon that severely injured and destroyed the lives of many people. Due to the explosion, flames of the fire were on for over one and a half days continuously leading to destruction by damaging the environment, disturbing the businesses and impacting the activities of fishing and tourism. Companies that were associated with the spill had to counter various problems as they were bound to clear the spill and compensate for the huge losses caused by the spill. Furthermore, this led to a creation of financial problems for the companies (Broader & Krauss, 2011). To counter these difficulties, an attorney group was formed so that the relief proceedings could be carried out. BP had to face several lawsuits as the impact of spill was massive as it spread for over 480 miles affecting many states. Authorities felt a need for strict and regulative procedure in order to mitigate such kinds of risks in future. Thus, EIA (Environmental Impact Assessment), and other protection controls are considered very relevant when it comes to the safety of environment (Booz, 2010). The best strategy is systematic disclosure by companies by considering the environmental, financial and social factors. Research As BP was the main operator in relation to the oil spill, it was implied that BP would be the only one to be burdened with several liabilities and exactly the same happened. Hence, the failure on the part of regulatory authorities will be taken into consideration together with an assessment of the stand of BP. Furthermore, an evaluation of the environment can also help to ascertain the effect of oil spill upon the environment itself and other stakeholders. With the support of this study, the financial impact on BP can also be obtained. This research mainly focuses upon the failure of regulatory authorities and stand of the public interest theory. It is a major discussion of this research because of the prevalence of various flaws in the regulatory system. Simply saying, these weaknesses in the governance system and ethics have also proved to be a key contributor of oil spill. The report also highlights the failures by the regulatory agencies that led to the negative impact on environment. It also focuses upon the fact that if there were various rules and regulations framed by the government then such a tragic disaster would have been avoided (Channel News Asia, 2013). Financial consequences Response of BP Due to the massive and diversified impact of oil spill, BP was influenced to restore the Gulf of Mexico areas affected by the spill. It also decided to take various measures in order to re-establish the economy as well as the environment. In relation to this, BP took steps to expend millions of money in order to ensure the stabilization process that included settlement, compensation, clean up etc. It can be observed from the sustainability review of 2010 that around $37.3 billion was being kept aside for the re-establishment procedure. As discussed earlier about the massive and diversified impact of oil spill, different activities tend to rose that required huge expenditure and BP had to expend most of its money for all such activities in order to re-enhance its goodwill and remove the impact of spill as much as possible (Mason, 2010). It also had to frame an Oil Spill Trust in relation to these matters and altogether it costed a heavy expenditure of $20 billion. The entire image of BP was at stake because of the incident and this drove it to spend huge money on mitigating the aftermath of spill. It even spent a huge amount of $1.25 billion per quarter until 2013. Corporate Responsibility Corporate Social Responsibility or CSR is the voluntary activities undertaken by the companies in order to operate in an environmental, social and economic manner. Furthermore, it helps in compliance with the legal and ethical standards. This regulation is not compulsory in nature by many oil corporations such as the Indian Oil, Marathon and Chevron have adopted this into their system. In the present situation, it is the government and the legal system’s duty to frame policies and procedures in order to avoid such disasters and it should ensure the compensation of affected parties (Cherry & Sneirson, 2010). Cleaning Cleaning the spill was the key duty of BP as the effects were widespread. Hence, BP took various measures in order to clean the spill and for this purpose, it organized it arranged a fleet of vessels and other tools that could collect the spill floating in water. There were around 5000 vessels organized for this purpose with more than 90000 people engaged for cleaning. This removal process costed more than $14 million to BP and led to a collection of around 827,045 vessels containing the oil (Broder, 2012). Environment In order to bring more efficiency to control the aftermath of oil spill, BP associated itself with several federal agencies that supported in assessing the impact of the disaster on the environment. Furthermore, these agencies helped to ascertain a Natural Resource Damage Report that portrayed the exact picture of damage together with measures required to compensate the damage. BP spent a lump sum amount of more than $600 million for the evaluation process. This NRD assessment proved to be the biggest of all, even from the assessment taken under the Oil Pollution Act (Broder, 2012). In relation to the aquatic and sea animals, BP took several measures to re-establish the past heritage. For this purpose, it carried out thousands of surveys for the birds and attempts was made for rescuing and protecting the sea animals by the introduction of rehabilitation centers. BP had to incur millions of expenditure towards the protection of wildlife foundation by conducting surveys in the entire Gulf region (BP Gulf Update, 2012).   Regulators BP was alone not at fault, the failure of government bodies were also to be blamed because competing interest was not focused upon by them that led to the violation of environment rules to a huge extent. The theory of public interest helps to highlight the functions and institutions that are relevant in the protection of economic efficiency. It is the responsibility of federal agencies to prepare themselves for any kinds of uncertainties arising in future and take corrective actions in order to get rid of them. It must also be determined when to delegate a decision to these independent regulatory agencies (CBS Chicago, 2013). Hence, the regulatory agencies failed to work inefficiently on their part because they mainly concentrated on the practical situations and thus it led to the loss of environmental benefits and other damages too. Thus, it was evident that the legal system and regulatory bodies functioned inefficiently and due to the prevalence of several flaws in the system; such a disaster affected millions of people and diversities. According to the surveys, it was clear that the presence of strong and effective government policies and procedures could have proved to be a very strong advantage over such disasters. This clearly indicated a misbalance in the theory of public interest and concepts of good corporate governance and ethics. According to the theory of public interest, if the markets were to perform on its own, then it would act indifferently (Fodor & Stowe, 2010). It was also evident that the federal agencies lacked various resources and tools in order to protect and safeguard the environment especially in relation to drilling and deepwater. This proves from the statement of the D
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