Domain Theory and Method Theory

Question: Discuss about the Domain Theory and Method Theory. Answer: Introduction This study deals with understanding the models and theories used in the field of accounting (Uno and Bartelmus 2013). In this particular assignment, emphasis has been given on understanding the accounting concepts in the recent world of accounting. For this assignment, Wesfarmers Limited has been selected that is listed on Australian Stock Exchange. This company occupies the topmost position in terms of revenue. The current segment focuses majorly on discussing on the corporate governance of Wesfarmers Limited and the conceptual framework used for financial reporting system. Addition to that, ethical issues, accounting issues and environmental issues faced by Wesfarmers Limited have been clearly explained aligning with impact on the issue on recent accounting field (Singleton-Green 2016). Wesfarmers has grown into one of the largest listed company that is headquartered in Western Australia (Wesfarmers.com.au 2017). This company operates in diverse business operations such as home improvement, supermarkets as well as office supplies and industrial and safety. This is one of the largest private sector employees that have a shareholder base of 500,000 approximately. Corporate Governance of Wesfarmers Limited The Board of Wesfarmers Limited is one of the strong advocates for enhancing good corporate governance (Nsi et al. 2014). Addition to that, the Board of Wesfarmers Limited is committed towards providing satisfactory returns to their potential shareholders as well as fulfilling its corporate governance obligations. This company Board Committee is responsible in meeting the best interest of their stakeholders. Wesfarmers Limited compiles with the third edition of ASX Corporate Governance Council (Lukka and Vinnari 2014). Key focus areas of the Board of Wesfarmers Limited for the financial year 2016 Wesfarmers Limited Management looks at the financial performance of the company and involves in strategy implementation (Kaplan and Atkinson 2015) Wesfarmers Limited monitors with the Group operating as well as cash flow performance for rendering long-term shareholder value creation (Gray, Adams and Owen 2014) Wesfarmers Limited reviews at the business operations as well as developmental plans for each of the division (Horngren et al. 2013) Wesfarmers Limited focus majorly on Group performance as well as implementation of strategies for bringing safety improvement and enhancing workplace safety awareness (Gaunt 2014) Wesfarmers Limited Management Board reviews majorly talent management as well as development (Henderson et al. 2015) Conceptual Framework for general purpose financial statement reports Conceptual Framework is a coherent system that has certain interrelated objectives as well as fundamental concepts prescribing with the nature, functions and limitations of FASB (Financial Accounting and Reporting) (Drury 2013). This framework is one of the vital parts of financial reporting system that majorly underpins the development of accounting standard. It help in setting out basis of recognition of items in the financial statements of Wesfarmers Limited like assets, liabilities, expenses and income (Deegan 2014). This framework provides basis for understanding the development of new accounting standard as well as evaluation of rules as in case of Wesfarmers Limited (Wesfarmers.com.au 2017). Financial Statement analysis The Financial Statement of Wesfarmers Limited complies in accordance with International Financial Reporting Standards (Crawford and Lepine 2013). The most important ratio used for financial statement analysis is Net Profit Margin. This reveals how much out for every sale Wesfarmers Limited gets in keeping after making the payments. This aspect is highly variable from industrial sector to other. In other words, higher operating margin reveals that Wesfarmers Limited has less financial risk. Therefore, gross margin tends in remaining stable for a specified time. There are certain fluctuations noticed that act as a positive sign of fraud or any other accounting irregularities (Cooper, Dacin and Palmer 2013). From the investor perspective, Return on Equity is a key financial ratio for Wesfarmers Limited. This financial ratio is subtracted from preferred shares indicating common shareholders how effectively money can be employed. Median 2-year Return on Equity of Wesfarmers Limited at 10% . Free Cash Flow mainly measures the aspects that are ignored by most of the investors. This will indicate the cash that Wesfarmers Limited can generate after spending money after maintaining or expanding fixed assets such as Property, Plant and Equipment known as Capital Expenditure. Therefore, free cash flow will be used by Wesfarmers Limited by investing other projects by way of enhancing shareholder values (Christensen, Nikolaev and Wittenberg?Moerman 2016). Annual report of Wesfarmers Limited The notes to financial statements take into consideration the information that is required for understanding the financial statements as well as material and relevant to the operations Information is considered to be material as well as relevant where the amount in question signifies in accordance with size or nature (Bebbington, Unerman and O'Dwyer 2014). The annual report is a summary of Wesfarmers Limited as well as its subsidiary companies operations for the financial year. This particular company is committed towards reducing the environmental footprint in association with production of the annual report (Beattie 2014). Wesfarmers Limited Board is committed to an executive remuneration framework that majorly focuses on driving the level of performance culture as well as linking executive pay (Ball 2013). This means the company makes ways for achieving the strategy as well as business objectives for generating satisfactory returns to the potential stakeholders. Senior Executive Remuneration is majorly set at levels where executive roles are mentioned. This aims at attracting as well as retaining the best people for reflecting executive competencies and capabilities. Therefore, Remuneration information in the statutory format will be provided in the section 3.6 (Uno and Bartelmus 2013). Wesfarmers Limited believes in long-term value creation for playing major role and serves the communities (Lukka and Vinnari 2014). At Wesfarmers Limited, sustainability means understanding as well as managing impact of community and environment for ensuring creation of value for near future. They take into consideration five major areas of business such as people, community, governance as well as sourcing and environment. Ethical issues of Wesfarmers Limited Wesfarmers Limited has poor record of staff treatment as they are paid less below award rates as well as high levels of casual and contract labor (Uno and Bartelmus 2013). These are the ethical issues faced by Wesfarmers Limited whereby the company gives diverse range of people the opportunity in finding flexible work as well as learning valuable vocational skills and progress in the career in and outside the sector (Wesfarmers.com.au 2017). Impact of the issue on share price and its resolution The above-mentioned ethical issue is a serious concern that should be taken into consideration. It can be pointed out that alcohol marketing as well as societal attitudes are the real reason behind overconsumption by the individual. This consumption is made by the individuals that are not in the interests of individual drinkers or their communities. These supermarkets (Coles) advertise baked food kept in the store that had been partially baked months earlier in actual sense (Lukka and Vinnari 2014). Environmental issues of Wesfarmers Limited Wesfarmers Limited had several allegations that harm people, animals and the environment. Most of the time it happens that items sold at Wesfarmers Limited hurt their consumers as they are consumed excessively (Cooper, Dacin and Palmer 2013). This is because individuals fails in selecting the things that can best advance their level of interests. It is believed that excessive advertising as well as cultural influences individuals and makes it hard for selection purpose. This is one of the reason why scrutinize take place on the sale of alcohol at Wesfarmers Limited (Coles) (Wesfarmers.com.au 2017). The process of producing products that Wesfarmers Limited sell actually harm who are not their customers such as animals and the environment as a whole (Uno and Bartelmus 2013). This means intensive as well as factory farming practices are considered environmentally unsustainable as well as hugely causes animal suffering. Palm oil can have wide ranging impact on wildlife as well as communities by way of land clearing and child labor (Wesfarmers.com.au 2017). Accounting issue of Wesfarmers Limited Wesfarmers Limited faces issues in maintaining relationship with suppliers (Lukka and Vinnari 2014). Addition to that, the company exercises unprecedented power based on size as well as market share for more than 75%. This company was abused because they impose uneconomic prices as well as unfair trading terms on the farmers and manufacturers. This activity forces suppliers in adopting unsustainable practices where they think that the company actually exercises their influence for bringing improvement in accounting aspects (Wesfarmers.com.au 2017). According to ACCC, Wesfarmers Limited admitted that crossing the line after demanding payments from suppliers (Wesfarmers.com.au 2017). This means the company looks at the claims whereby they are bullied by their competitors by pressuring in making profit lost after discounting by retailers. These are the practices that harm suppliers of the company and it becomes difficult for them in surviving in competitive business environment (Cooper, Dacin and Palmer 2013). Corporate Social Responsibility Wesfarmers Limited is committed towards proactively managing their community and environmental impact by continuously creating value over long-term (Uno and Bartelmus 2013). They follow 10 principles relating with the sustainability issues that have been identified for the given financial year. Each of the division at Wesfarmers Limited applies these principles by taking into consideration from their operating environment. Wesfarmers Limited encourage by setting own internal targets in relation with the core CSR principles (Lukka and Vinnari 2014). Corporate Social Responsibility of Wesfarmers Limited is as follows: People- Wesfarmers Limited aims at focusing in providing safe workplace for their employees (Wesfarmers.com.au 2017). Addition to that, Wesfarmers Limited provides wide-range of opportunities for the people by enhancing their job performance as well as developing their careers. Therefore, Wesfarmers Limited strives in creating an inclusive work environment by careful attention to gender diversity as well as inclusion of Aboriginal and Torres Strait Islander peoples (Uno and Bartelmus 2013). Sourcing- Wesfarmers Limited commit towards maintaining strong as well as respectful relationships with the suppliers (Wesfarmers.com.au 2017). This company strives its best for sourcing products in a responsible way at the time of working with supplier for bringing improving in their social as well as environmental practices. Community- Wesfarmers Limited aims at making positive contribution to the communities for operating activities. Addition to that, Wesfarmers Limited committed towards providing customers with safe products (Cooper, Dacin and Palmer 2013). Environment- Wesfarmers Limited strives in reducing the emissions intensity of business as well as improving resilience towards climate change. This means Wesfarmers Limited strives in reducing the waste to landfill as water use and where possible (Lukka and Vinnari 2014) Governance- Wesfarmers Limited aims at maintaining robust corporate governance policies in the given business (Cooper, Dacin and Palmer 2013) Critical analysis on legitimacy As rightly put forward by Deegan (2013), Legitimacy and stakeholder theories majorly comes under both systems oriented theories whereby it come under the umbrella of Political Economy Theory. In this study, proper emphasis has been given on financial reporting of Wesfarmers Limited after considering the unregulated corporate reporting in relation with both the theories (Legitimacy and Stakeholder) (Wesfarmers.com.au 2017). Legitimacy theory majorly relies upon the notion of social contract (Lukka and Vinnari 2014). It depends upon the aspect whereby Wesfarmers Limited ensure operating within the bounds as well as norms in their respective societies as viewed to be legitimate in nature. In order to achieve legitimacy, Wesfarmers Limited should adopt their output goals as well as methods for confirming and evident in the company. It needs to be attempted by communicating for altering the definition of social legitimacy. It attempts by identifying with symbols as well as values by implying legitimacy as mentioned in the Wesfarmers Limited (Uno and Bartelmus 2013). Conclusion At the end of the study, it is concluded that Wesfarmers Limited has strong corporate governance and Corporate Social Responsibility. They believe in providing satisfactory returns to their potential stakeholders. The above analysis explains the legitimacy attributes used by Wesfarmers Limited. Conceptual framework is explained with proper emphasis upon financial reporting aspects. It is recommended that Wesfarmers Limited should minimize the allegations on unsustainable practices used by the company. 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