Accounting is the process of identifying, measuring and communicating economic information about an entity to a variety of users for decision making purposes.

Identifying transactions ——>Business transactions: – are the external exchange of something of value between 2 or more entities – affect assets, liabilities and equity – can be reliably measured and recorded.

Accounting information and its role in decision making • Accounting information is designed to meet the needs of both internal and external users. • Accounting information is extremely valuable to an entity’s owner or management (internal users). • External users (stakeholders) are parties outside the entity who use information to make decisions about the entity.Stakeholders can include: – shareholders (both current and prospective) – customers – suppliers and banks – employees – government authorities (e.g. ATO and ASIC).

Financial accounting and management accounting • Financial accounting: – preparation and presentation of financial statements – allow users to make economic decisions about the entity. • Financial statements: – a set of statements – directed towards the common information needs of a wide range of users (both internal and external). • Financial statements consist of: – statement of cash flows – statement of financial position – statement of profit or loss. • For companies: – the statement of profit or loss and other comprehensive income – the statement of changes in equity. • Management accounting: – Economic information for internal users. – Reflected in financial accounting statements for external users. – Predominately about planning and decision making for future events. – Core activities include: • formulating plans and budgets • providing information to be used in monitoring and control within the entity.

Role of accounting information in business planning • Benefits of a business plan: – The business plan provides a clear, formal statement of direction and purpose. – Allows management and employees to work towards defined goals in the daily operations of the business. – The business entity in evaluating the business. • Operation of the business: ‒ Accounting information provides managers and owners with the tools they require to: ‒ make decisions regarding the daily running of the business entity ‒ evaluate whether the goals set by the business entity in the planning process are being achieved. ‒ Cost–volume–profit analysis: understanding how profits will change in response to changes in sales volumes, costs and prices. • Evaluation of the business plan: – Accounting information provides management with the tools necessary to: • evaluate the business plan • encourage the management and owners to review all aspects of the operations. – Management can make changes to the entity’s operating activities to ensure that they keep on track with the original business plan.

Globalisation of accounting • Entities are becoming larger, more diversified and multinational. • Therefore, more complicated accounting and auditing services are required.

Digital disruption and the impact on accounting • Digital disruption has been defined as 'New technologies and business models that impact, transform or re-invent existing goods and services, industries and business activities. It's a change that can be positive or negative, and can drive substantial changes across the economy' (Queensland Government Chief Information Office 2018). • In recent years we have seen the emergence of: – fintech industry – Big Data and data analytics – cloud computing – mobile phone technology – AI – social media. • All of these have consequences for the accounting profession.

Blockchain technology • Blockchain technology supports cryptocurrencies such as Bitcoin. • Bitcoin is a digital currency that allows for online payments to be made without going through a financial institution (Raymaekers 2014). • A blockchain is a structure of data that represents a financial ledger entry (Hassell 2016). The blockchain’s data is partitioned into blocks and these blocks are linked together using cryptographic signatures. • The blockchain creates both opportunities and challenges for the accounting profession: – some current accounting and audit roles will diminish, as there will be less need for accountants and auditors to perform the transaction processing, reconciliation and control type tasks – there will be new opportunities for auditors in overseeing and auditing the blockchain.

Artificial intelligence (AI) • AI is having an impact on many industries. • Traditionally robots have been used in the manufacturing industry. • In recent years there has been adoption of robotic technology in the healthcare, agriculture and food-preparation industries. • In auditing, drones are performing audits in remote areas that are difficult to access and would otherwise be too expensive or unsafe to send a human to.

Business sustainability, drivers, principles and theories • A growing environmental and societal awareness has put pressure on entities to consider their non-financial impacts. Business sustainability refers to use of the world’s resources in a way that does not compromise the ability of future generations to meet their needs. • Entities need to account for: – all resources used (labour, material, energy, forests, water, air etc.) – all outputs produced (products/services, carbon emissions, waste etc.). • Key drivers of sustainability: – Competition for resources: • The world's population is continuously growing. – Climate change: • We have a fossil-fuel based economy. – Economic globalisation: • The integration of national economies into the global economy. • Key drivers of sustainability: – Connectivity and communication: • Increases in connectivity has led to less time to both build reputations and/or destroy reputations. • Theories of business sustainability: – Corporate social responsibility (CSR): • A corporation has many stakeholders (individual and groups). – For example shareholders (owners), employees, creditors, suppliers and governments. • Does the entity have a responsibility to consider them all equally (in regard to CSR)?

Theories of business sustainability – Shareholder value: • Shareholder (owner) returns are the primary focus of an organisation. • Agency theory: –Managers act on behalf of shareholders. – Stakeholder theory: • Holds that the purpose of the entity is to work for the good of all stakeholder groups, not just to maximise shareholder wealth. – Stewardship theory: • Directors act in the interest of a group(s) of stakeholders and not shareholder value. • Contributes to the rise of independent non-executive directors. – Legitimacy theory: • Theory that entities must conduct operations in accordance with societal expectations. • Society allows the entity to operate (pursue its objectives and rewards) so long as the entity agrees to act in a socially acceptable manner.

Benefits of environmental reporting • Improving stakeholder relations • Creating market opportunities • Increasing control over environmental disclosure • Satisfying a mandatory or signatory reporting need • Gaining the confidence of investors, insurers and financial institutions • Triggering internal improvement in environmental performance • Gaining external recognition/awards.

Benefits of sustainability reporting • Reputation and brand benefits • Securing a 'social licence to operate' • Attraction and retention of high-calibre employees • Improved access to the investor market • Establishing position as a preferred supplier • Reducing risk profile;cost savings • Innovation aligning stakeholder needs with management focus • Creating a sound basis for stakeholder dialogue.

GRI standards • The GRI standards encourage the reporting of sustainability practices. Sustainability reporting promotes the transparency and accountability of an entity’s operations. GRI standards contain four parts: 1. Universal Standards 2. Economic Standards 3. Environmental Standards 4. Social Standards.

Role of accountants in sustainability • The role of accountants in promoting and reporting sustainability is very broad and includes: – reporting – cost analysis – auditing and assurance services.

Integrated reporting • Integrated reporting (IR) refers to the integration of social, environmental, financial and governance information.In 2010 the International Integrated Reporting Council (IIRC) was formed, which has accelerated the implementation of IR. • An integrated report is based on the six capitals: financial capital, manufactured capital, human capital, intellectual capital, natural capital, and social and relationship capital.

Careers in accounting • Three main areas of employment (traditionally): – public accounting – private sector – government and not-for-profit. • Exciting new opportunities for today’s accounting graduates. • New areas for an accounting profession include: – forensic accounting (e.g. computer hacking) – internal controls for e-commerce (e.g. BPAY) – administration of insolvency (e.g. failing companies) – sustainability/carbon accounting (e.g. business risk, greenhouse gas emissions and carbon reporting).

Appendix 1A • The business planning process: – Please refer to chapter 1, pages 26–44, which covers: • What is a business plan? • Advantages of a business plan • Disadvantages of a business plan • Components of a business plan • Preparing the document • Sample business plan.