Accounting Theory with Reference to Synergiz’s Research Publication

Question: Discuss about the Accounting Theory with Reference to Synergizs Research Publication. Answer: Introduction The study is particularly based on a research publication of Synergiz, wherein the financial impacts of the responses of BP P.L.C regarding the oil spill is evaluated. BP is a global energy (gas and oil) company, which operations in the deserts, deep seas as well as retail stations. It provides power and fuel for the purpose of mobility, heat and light to the customers across the world (BP, 2017). The selected article incorporates approaches related to damage valuation and its comparison with the relevantaccounting and reporting needs for better reliability (Houdet Germaneau, 2011). Thus, the objective of this report is to evaluate the responses with respect to the interest theory along with analyzing the role of the regulators or politicians. Furthermore, the motivation of the politicians and regulators are also critically scrutinized, in addition to the consideration of related events of such oil spills in the recent scenario and their impacts. Discussion Interest Theory with Respect to the Article The interest theory under the umbrella of public consist rules and regulations, which were used for the benefits and protection of the public in general (Hantke-Domas, 2003). As per the theory of Government, public interest model integrated voting in the process of decision-making by the authorities. According to which there are three public sectors and public goods such as legal institutions, national defense, welfare, education and services (fire and water protection, sewage disposals). Another sector is economic regulation, which involves economic market regulations including environmental and social regulations on the issues such as child labor, animal cruelty, public decency and working conditions. Particularly, environmental regulations covered the rights of public property (Maloney, 2001). Furthermore, with respect to the Public Interest Theory of the article, the oil spill in the deep water horizon caused significant damage that affected the public directly and indirectly. . This is also termed as BP Oil Spill in the marine ecosystem, and is also is known as the largest oil spill in the entire history of US. This was a matter of great concern and has become one of the most popular topics for debates due to its high intensity and level of damage to the marine environment. BP was the key developer of the particular oil field in which the accident had occurred, for which it was held responsible along with Transocean Ltd and Halliburton, who were constructing and operating in the oil field. Subsequently, BP had to bear cleanup costs as per the regulations of the public interest theory (Houdet Germaneau, 2011). As per the regulations of interest theory of public, the political leaders played a significant role in regulating this theory. Not only in the financial crisis but also in this great concern of oil spill, the politicians encouraged these regulations. This helped in protecting the American values and norms relating to the human health, economic stability and environment safety. In addition, their contribution to make a better energy policy was also found to be prominent. Thus, for regulating the operations of precautionary principles, BP took unnecessary risks in their further activities (Flournoy, Andreen, Bratspies, Doremus, Flatt, Glicksman, Mintz, Rohlf, Sinden, Steinzor, Tomain, Zellmer Goodwin, 2010). The motivation of political regulators was also important because of the fact it was affecting the environment, polluting the ecosystem. The oil spill thereby had long lasting effects, even after of the occurrence of the event. Therefore, the political pressure ensured better env ironmental disclosures by the organizations to the public in order to address such problems in future. In addition, it also focused on creating plans for disasters, which would comply with the theory of disclosures regarding the environment. It was not only the political leaders, but also various agencies were regulating these activities of protection after this massive oil spill, which resulted in enhancing the environmental risks in the minds of the investors as well as general public (Heflin Wallace, 2017). Thus, it can be opined that they were specifically concerned about the health issues that were evident after the spill, which was affecting the public. This factor was thus considered as one of the most essential factors that led the politicians as well as the regulators to implements these regulations. Responding to the Article with Arguments As per the article, there are various arguments that will be highlighted in this section of the study. It was observed that there was a significant need for adequate environmental reporting andaccounting with more reliability post oil spill, which was viewed to be a positive aspect.. However, there are some criticisms that it had not disclosed any details relating to the social and ecosystem damage. In addition, it did not display the underlying calculations and methodologies for its pre-tax charges, which accounted for US$40.9 billion. On the other hand, adequate information could have been utilized to calculate the global costs of such incidents. Another drawback was that the temporary impairment of the ecosystem assets and values were also missing. Therefore, it can be stated that the limited disclosure of BP restricted the stakeholders to understand the actual scenario of the implications of the oil spill in the context of environmental, social and financial aspects (Houdet Germ aneau, 2011). In the contrary, BP made regular claims of its efforts for global warming and related issues before the occurrence of the incident. It further highlighted its achievement for winning Best Greenwash award for the efforts of investing in the renewable energy. These efforts enhanced its social as well as environmental performance (Lyon Maxwell, 2006). However, the damage that it had caused with oil spill incident created a negative impression. Hence, it can be opined that non-disclosure of certain facts and figures post incident was considered to be misleading the public along with its investors and shareholders. Corresponding to the financial disclosures, it can be argued that BP provided the information for green washing rather than accountability and reliability. With respect to all the damages it had resulted in loss of resources and imbalance of the ecosystem, accounted for US $40.9 billion relating to the recovery from the disaster. Thus, corporate reporting was observed to be inadequate in its annual report with respect to the disclosures of information, also failed to reveal the actual loss, which did not comply with anyaccounting standard and accounting systems. This created dissatisfaction among the public and misguided proper environmental accounting from the viewpoint of shareholders and investors (Azad, 2017). However, according to Ismail (2017), there were various companies that had implemented policies, which helped in balancing the economic and social responsibility performances. This was done as a response to the various incidents of oil spills such as the Deepwater Horizon i n 2010, which raised several criticisms regarding the methods of extractions. This was often considered to be risky for the business. As a result of which various companies enhanced their accounting, financial and environmental reporting methods and standards (Ismail, 2017; Babcock, 2012). Recent Events In the recent context, various oil spill events were evident apart from the largest oil spill in the history that is the BP oil spill. Few of them were oil spill in Nigeria in 2010 in which 95,500 tons of oils was spilled in Niger Delta, which is depicted in Figure 1 below. Similar event was also observed in China in the same year with 90,000 tons of wastage. In addition, Venezuela in 2012, also suffered the incident, wherein it resulted 41,000 tons of oil was spilled (Figure 1) (Ismail, 2017). Figure 1: Major Oil Spills since Last Four Decades (Source: Ismail, 2017) It can be interpreted that irrespective of the fact, the recent the volume of oil spill all over the world has been low. However, in the year 2010, oil spills in the Gulf of Mexico was considered as one of the largest oil spills (ABC, 2010). Subsequently, there were two other oil spills incidents in 2010, which was followed by the most recent oil spill in 2012... According to Roser (n.d.), the large and medium sized oil spills have decreased in the recent years. However, between the years 1970-2016, tanker oil spill incidents have resulted in the wastage of 5.73 million tons of oil (Roser, n.d.). Chemical and oil spills in the waters right from collisions to accidents while fuel transfer or explosions as in the BP oil spill have occurred almost every year (NOAA, 2017). Another incident similar to oil spill events were pipeline spills especially in US. It was estimated that nearly 700 barrels of crude oil was spilled from pipelines particularly in North Dakota (RT, 2016). Another exam ple of such incidents was Greek oil spills, which created threats to the marine ecosystem, which was a result of a sunken tanker spill (Euronews, 2017). Additionally, the adverse effects of the Gulf oil spill was evident in the follow up plan in which the workers, who were carrying out clean-up activities were facing health issues (NIH, 2017). Conclusion It can be concluded that irrespective of the facts, the amount of oil spills in the recent years have significantly decreased. However, the adverse effects of already occurred events have not been totally eradicated. In addition, not only human beings but the natural environment and ecosystem as a whole have been massively affected by these disasters, small or big. Thus, it is necessary to have better plans for avoiding such incidents and come up with solutions against the adverse effects. It is therefore the responsibility of the production companies such as BP to have a sense of corporate social responsibility. In addition, it is essential for these companies to provide detailed accounting and financial reports. This would not only make them prepared for such events, but also build trust among the public, so that they can attract more shareholders and investors. Therefore, all the disclosures should be made by the companies irrespective of the intensity of the disasters. So , it wo uld be easier for the government and administrative authorities to take necessary decisions in making and amending accounting and financing policies. References ABC, 2010, Timeline: 20 years of major oil spills, ABC News, viewed 21 September 2017, https://www.abc.net.au/news/2010-05-03/timeline-20-years-of-major-oil-spills/419898. Azad, M, 2017, BP's financial disclosure is greenwashing rather than accountability, Academia, viewed 21 September 2017, https://www.academia.edu/3498045/BPs_financial_disclosure_is_greenwashing_rather_than_accountability Babcock, H. M, 2012, A risky business: Generation of nuclear power and deepwater drilling for offshore oil and gas, Columbia Journal of Environmental Law, vol. 37, no. 1, pp. 63-149. BP, 2017, About BP, BP P.L.C., viewed 21 September 2017,https://www.bp.com/en/global/corporate/about-bp.html Euronews 2017, Greek oil spill spreads: fears grow for marine life, World, viewed 21 September 2017, https://www.euronews.com/2017/09/14/greek-oil-spill-spreads-fears-grow-for-marine-life Flournoy, A, Andreen, W.L, Bratspies, R.M, Doremus, H, Flatt, V.B, Glicksman, R.L, Mintz, J.A, Rohlf, D, Sinden, A, Steinzor, R.I , Tomain, J.P, Zellmer, S Goodwin, J, 2010, Regulatory blowout: How regulatory failures made the BP disaster possible, and how the system can be fixed to avoid a recurrence, Center for Progressive Reform,viewed 21 September 2017, https://escholarship.org/uc/item/06t9s399#page-2 Hantke-Domas, M, 2003, The public interest theory of regulation: Non-Existence or misinterpretation?, European Journal of Law and Economics, vol. 15, pp. 165-194. Heflin, F Wallace, D, 2017, The BP oil spill: Shareholder wealth effects and environmental disclosures, Journal of Business Finance Accounting, vol. 44, no. (3-4), pp. 337-374. Houdet, J Germaneau, C, 2011, The financial impacts of BPs response to the deepwater horizon oil spill, Synergiz Case study 2011-01, pp. 1-5. Ismail, A. H, 2017, Oil and gas companies adopting policies aimed at balancing economic performance with social responsibilities, Environmental Accounting and Reporting, viewed 21 September 2017, https://www.ogfj.com/articles/print/volume-14/issue-3/features/environmental-accounting-and-reporting.html Lyon, T. P Maxwell, J W, 2011, Greenwash: corporate environmental disclosure under threat of audit, Journal of Economics Management Strategy, vol. 20, no. 1, pp.3-41. Maloney, M. T, 2001, 19. The theory of government, A Study In Property Right, pp. 1-5. NIH, 2017, Gulf spill oil dispersants associated with health symptoms in cleanup workers, News Releases, viewed 21 September 2017, https://www.nih.gov/news-events/news-releases/gulf-spill-oil-dispersants-associated-health-symptoms-cleanup-workers NOAA 2017, Oil and chemical spills, National Ocean Service, viewed 21 September 2017, https://oceanservice.noaa.gov/hazards/spills/ Roser, M, No Date, Oil spills, Our World in Data, viewed 21 September 2017, https://ourworldindata.org/oil-spills/ RT, 2016, Top 5 disasterous pipeline spills of 2016, Autonomous Nonprofit Organization, viewed 21 September 2017, https://www.rt.com/usa/371086-worst-pipeline-accidents-2016/