Advanced Accounting Principles and Practice
Dr. Li Liu
Chesten Anne G. Beloso – 212342256
Xiaohan Liu - 211640339
Cuanling Wei - 212120435
“We certify that the attached work is entirely our own, except where material quoted or paraphrased is acknowledged in the text. We also declare that it has not been submitted for assessment in another unit or course.”
06 May 2013
Number of words: 3,943
This assignment aims to present in a clear and concise manner our viewpoint towards remuneration disclosure, considering steps to improve this matter of contention is taken voluntarily by the boards as recently stated by The Australian Financial Review. Section I explains our disposition about amendments done concerning disclosing remunerations. Financial accounting principle theories utilised, along with published printed information came to our conclusion which suggests executive pay reports simplification is substantial to shareholders understanding of remuneration outline. Section II takes up voluntary remuneration disclosure and its likely consequences applying IASB Conceptual Framework of qualitative characteristics. Analytical thinking and apprehension lead us to conclude that an increase in participation over the matter results to a much better comprehension from the shareholders. Section III logically analyses the argument about share based payment having to cost the company anything or not. Upon critical evaluation of published views, adding our sensible and sound judgment, the process itself of issuing share options consumes resources, meaning that, it falls down as an expenditure.
The motivation to improve remuneration disclosure
A fierce debate is raging about the legitimacy of executive pay rises. The evidence is mixed about how efficient remuneration disclosure has been, but what is clear is that the responsibility to ensure it is appropriate resides with the boards, and that there is a need for greater shareholder participation (Fels, 2010). The Australian Securities and Investments Commission (ASIC) have called for companies to provide more clarity on remuneration arrangements for their directors and executives (Gibson, 2013). As a challenge, we will discuss and analyse the motivations to improve remuneration disclosure. The following are the reasons why there is a need to improve disclosure of executive pay: * Assessing the `efficiency’ of executive pay is consequently problematic. Many performance indicators used by companies are not publicly disclosed and risk preferences vary across companies and individuals (Fels, A. 2010). * There has been a widespread perception that executives have been rewarded for failure or good luck – receiving rewards for rises in the share market price that had little to do with their contribution to company performance, and much to do with what was happening in global stock markets and asset valuations (Fels, A. 2010). * Boards voluntarily taking steps to improve remuneration disclosure by adding take home pay tables to annual reports are one step ahead of the game as demands for increased disclosure persist (Weggins, J. 2012). * Corporations and Market Advisory Committee (CAMAC) review the disclosure of executive pay reports and the report include providing more relevant information to shareholders, streamlining pay reports and disclosure of all termination payments for executives (Disclosure on Aust Exec`s Pay Need To Be Simplified: Report, 2011). * Boards are compensating for bonus cuts by inflating base pay and long term incentives. As share prices and earnings decline, board of directors keep changing the mix of cash, bonuses and short-term incentives. Long term incentives now account for a greater percentage of total pay than they have in previous years (Smith, M. 2012). * The desire to comply with legal and professional requirements. There could be benefits for...
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