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You are required to answer the following 4 Case Study Questipons

The Australian Accounting Standards Board (AASB) is an independent accounting standard-setter based in Melbourne, Australia which issues Accounting Standards on the elements of financial statements. Australian entities mandatorily follow these standards and describe the accounting policies they use as a note to the financial statements.

Briefly investigate and summarize the accounting policies of an ASX listed large cap (based on market capitalization) company on each of its element of financial statements.

Do you think that social and environmental information should be voluntarily reported in accounting disclosure? Why do you think so?

Briefly discuss the different accounting theories which support your arguments.

The corporate governance framework, policies and practices of each entity reflect the standard of its corporate governance. You are required to investigate and report on the roles and responsibilities of a corporate board of ASX listed large cap company.

More specifically, you need to report on its corporate governance structure and the roles and responsibilities of different board committees. For example, you can visit the corporate governance of AGL Ltd at the following link and can report on it. (Links to an external site.)

As Australia’s largest greenhouse gas emitter, AGL has a responsibility to be transparent about the risks and opportunities that climate change poses to its business, the community and the economy more broadly.

For this reason, AGL follows the guidance provided by the Financial Stability Board's Task Force on Climate-Related Financial Disclosure’s voluntary disclosure framework (TCFD Framework) in both its financial report and in its associated Carbon Scenario Analysis report.

1. Briefly state the TCFD framework of AGL which can be accessed at: (Links to an external site.)

2. Critically evaluate the environmental report of AGL in its financial report 2019 which can be accessed at: (Links to an external site.)

3. Australian ASX listed company creates value for shareholders and other stakeholders through the utilisation of various forms of capital such as financial, manufactured, intellectual, human, social and relationship and natural. State each of the capital as reported by AGL which can be accessed at: (Links to an external site.)

ASX Listed Company's Accounting Policies

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:

  • AASB 9 standard of financial instruments were replaced by AASB 139 standards of financial instruments and its recognition & measurement. The classification, hedge accounting and measurement of financial instruments are done according to this standard. AGL has used AASB 9 with the initial sate of application on 1stof July 2018. They adjusted the amount with the information declared in 2017 1st
  • AASB 15 standard for revenue from contracts with customers are replaced with AASB 118 standard for accounting of the revenue recognised from contracts with customers. The company first done a comprehensive analysis for understanding whether the recognition of revenue should be appropriate or not ( identified that the AASB 15 standard doesnot have any material impact for the recognition and measurement of the AGL’s revenue.
  • Accouting policies of AASB 16 has been used for reporting the leases. The leases are recognised at its fair value. The financial lease liabilities were included in the financial statement. In accordance to this standard the assets are recognised at its fair value. The lease payments were assigned as finance charges and decrease of the lease liability to achieve a constant rate of interest on the liability. The asset pursuant to financial leases were depreciated at its useful life.
  • For accounting of hedged instruments, the business discontinued the instrument in case of the instrument being sold, exercised or terminated (Miah 2017). The accounting for hedge items has been done by adjusting the fair value to the carrying amount that has been raised from profit or loss at the date of hedging.
  • The accounting of derivative hedges like cash flow hedges are recognised as cash flow hedge reserves at uts cumulative fair value. Any gain or loss from the hedges are recognised in the profit and loss statement in the other expense account.
  • The intrinsic value from the foreign transactions in the form of option contract are recognised as the hedged instrument. Any gain or loss related to the intrinsic value from the foreign transactions of the option contract are recognised as cash flow hedging reserves.
  • The change in the value of cross-currency contract are determined as the hedge instrument. The gains and losses from this hedge instrument are recognised in the cash flow hedge reserves in the equity section (Stadler and Nobes 2018). The change in currency basis is recognised in the comprehensive income in the cost related to hedge reserve. For entire currency contract, the gain or loss is recognised in the cash flow hedge in the equity section.

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.

Importance of Social and Environmental Information in Accounting Disclosure

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.

Accounting Theories that Support this Argument

Some of the responsibilities of AGL board are as follows:

  • They need to effectively review the strategic direction of the business which includes the plan & budget and various initiative plans.
  • They are responsible for approving the values of the company for clearly expressing the behaviour of the company’s people and conduct meeting for its improvement.
  • The board members are also responsible for management of the organisational culture, standards & their reputation to ethically conduct the business and provide core values to the society.
  • They are also responsible for assessing the performance of their Chief Executive Officer.
  • Board members are responsible for approving various changes required in the business structure.
  • They are responsible for considering the social, environmental and ethical impact of AGL business and accordingly strategies to improve the legislative & regulatory requirements and monitoring the overall compliance.  

Corporate Governance structure of the company

  • The board of directors are responsible for managing the organisational culture and ethically conduct the business to enhance the business reputation. Brett Redman is the CEO of the business.
  • The chair person is responsible for conducting shareholders & board meetings. They lead the board committee to solve the problems.
  • Board meeting of the company is held 20 times in a year. All the directors attend this meeting to discuss on strategies and plan (van Baarle et al. 2019).
  • AGL has independent board of directors and the managers are free in terms of any type of interest, relationship and involve themselves in various organisational issues.
  • Board committee consists of four committee which involves; audit and risk committee, nomination committee, performance and people committee and sustainability committee (Nwaiwu and Joseph 2018).
  • Shareholders are engaged in meetings and are involved in meetings for making business related decisions (Xu et al. 2016). Shareholders meetings are arranged in every half years for resolving their issues.
  • The leadership structure of the business has diversity. 50% of the senior manager position has been represented by the women. 34% of the organisation has female workforce and are involved in achieving the organisational objectives.
  1. TCFD Framework of AGL

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:

  • Strategy- The strategy of AGL energy limited is to do the business according to AGL greenhouse Gas policy. A scenario analysis has been done in order to effectively understand the long-term impact of the business. This is done under potential policy scenario. The business use external model software known as PLEXOS to analyse the scenario.
  • Metrics and targets- The intensity of carbon from AGL portfolio is used for measuring their performance on timely basis.
  • Risk management- Risk & opportunities of the business is managed according to framework of AGL risk management for operating environment (Dietz et al. 2018). Some of the risks are transitional risks related to asset planning and many more & physical risk related to weather change or temperature change.
  • Governance- The risks & opportunities related to climate change are considered by the company board members and board committees.  

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.

  1. Environmental report of AGL Energy Ltd

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.

  1. Forms of capital reported by 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:

  • Financial capital- financial capital of the business has been used for providing financial support to the business in terms of building their strategy & investing in various projects for their growth opportunities.
  • Intellectual capital- This capital is used for business system and process. They use this to develop the business process, improve the transparency of the system, management, energy portfolio, customer analytics and other business activities.
  • Manufactured capital- This capital is used for business infrastructure. The capital is used for effective ide of the organisational assets and enable the assets to deliver the value to the customers.
  • Human capital- This include the people of the organisation. This includes the wellbeing, engagement and behaviour of the employees & contractors.
  • Natural capital- Environment is the natural capital. AGL is directly depend on the natural environment for providing its product and services.
  • Social & responsibilities capital- This includes the communities and relationship of the business. They use this capital to strengthen the business relationship with their community and build trust among the communities (Holloway et al. 2016). The business use this capital to improve the brand reputation and engage their key stakeholders. This capital is also used for building trust among the customers ( & relationship capital is used to build the residential relationship or relationship among the customers of wholesale.

References (2020). [online] Available at: [Accessed 12 May 2020]. (2020). [online] Available at: [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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