Abstract
ABSTRACT This research analyzes the influence that the performance of GHG emissions has on the level of transparency in financial reporting. Content analysis of the financial statement notes allowed the level of transparency to be measured. The results suggest that the level of transparency in financial reporting is negatively related to the performance of GHG emissions when financial reports are prepared on the basis of the International Financial Reporting Standards. It was also concluded that more ‘good news’ is disclosed by companies when their GHG emissions’ performance reduces. This study complements previous literature about transparency in financial reporting, and the necessity to relate it to eco-efficiency measures to empower the decision-making process of stakeholders. The study also provides a reference for European accounting regulators on the behavior of companies with regard to this issue.
Highlights
Accounting environmental matters incorporates a two-fold type of information for stakeholders (Burritt, Schaltegger, & Zvezdov, 2011): on the one hand, the financial impacts induced by environmental issues, and on the other, the physical impacts on the environment that sometimes result in a relationship of conflict and/or dependency.Interest in the financial impacts of environmental matters has increased in the European Union (EU) following two milestones (Llena, Moneva, & Hernandez, 2007): Recommendation 2001/453 of May 30 on the recognition, measurement and disclosure of environmental information in annual accounts and annual reports; and implementation of the European Union Emission Trading Scheme (EU ETS)
European Financial Reporting Advisory Group (EFRAG) and extensive previous literature (Bebbington & LarrinagaGonzález, 2008; Black, 2013; Ertimur, Francis, Gonzales & Schipper, 2017; Giner-Inchausti, 2014; Lovell et al, 2013; MacKenzie, 2009; Steenkamp, Rahman, & Kashyap, 2011; Veith, Zimmermann, & Werner, 2009; Warwick & Ng, 2012) had pointed out that the mismatches introduced by IFRIC 3 were mainly due to a discordant measurement of the assets and the liabilities (GHG emissions), because the emission allowances (EAs) were measured at cost, or a revaluation amount, while the liability was at fair value, which would result in an artificial volatility in the reported earnings and would not reflect the economic reality of the companies
There are few such studies, because data on the subject are difficult to obtain and relate. This is true for both financial data, since the accounting treatment of EAs and GHG emissions requires an analysis of qualitative financial information, and the quantitative data in the GHG emissions figures that are self-reported
Summary
Interest in the financial impacts of environmental matters has increased in the European Union (EU) following two milestones (Llena, Moneva, & Hernandez, 2007): Recommendation 2001/453 of May 30 on the recognition, measurement and disclosure of environmental information in annual accounts and annual reports; and implementation of the European Union Emission Trading Scheme (EU ETS). Previous literature has concluded that there was highly frequent non-disclosure (Black, 2013; Lovell et al, 2010; PWC & IETA, 2007; Warwick & Ng, 2012) This may have been due to professional judgement interpreting transactions in a market that is based on the cap-and-trade system as being materially relevant (Busch & Hoffman, 2001). This system frequently justifies the adoption of off-balance sheet policies (Criado-Jiménez, Fernández-Chulián, Husillos-Carqués, & Larrinaga-González, 2008), Lovell et al (2013), providing evidence of the significant materiality of EAs, undermine the grounds of this justification
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
