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The evolution of financial information to the sustainabilty information

The Volkswagen Group case

Written by E. Poda

Paper category

Master Thesis


Business Administration>Accounting




Master Thesis From financial accounting to sustainability accounting 1.1 Introduction It is very important that certain events can be transformed into milestones in the development of certain subjects of interest. This is verified by the contributions of scholars who collate all knowledge, for two main reasons. First, it can serve the public for a proper purpose, and second, it can serve as a basis for further development and research. We focus on the accounting field. The double-entry bookkeeping system (Sangster et al., 2014) was made public with the help of Franciscan monk Luca Pacioli. Compiled accounting methods used by merchants in northern Italy, including double-entry bookkeeping, trial balances, debit and credit balance sheets, periodicals and ledger ledgers, in the "Summary of Arithmetic, Geometry, Proportion and Proportion" (Venice, 1494) ) In the business chapter of the paper. This is the result of 30 years of cooperation with merchants and craftsmen. At that time, the balance sheet pictures were only available to company owners. Of course, the record of business and government activity information has been in the Venetian since the barter era. Basic knowledge has existed for centuries, ignoring changes in geopolitics, economics, and legislation. At the same time, the first footprint of economic globalization appeared. It dates back to the era of the great colonial empire (Schwarzenberger, 1966). The Sun Bay Company, the British East India Company, and the Dutch East India Company began, and the national economy became tense. The two industrial revolutions marked an absolute modern way of working, extending from agriculture-based economy, commerce and handicrafts to factory organization. In particular, the development of companies in the commercial and manufacturing fields in the 19th century enhanced the practice of accounting and adapted to more information-needed publics. Now things are getting more complicated. On the one hand, more workers, more goods, more services, and more capital are needed. On the other hand, it involves more salaries, more taxes, and more payments to suppliers. The first professional association of accountants was established. In the United Kingdom, ICAEW—The Institute of Chartered Accountants in England and Wales was established in 1880 under the Royal Charter, while in the United States of America, AAPA—The American Association of Public Accountants was established in 1887. This is the most important commercial code in the century that has spread, including the chapter on accounting law. After the era of liberalism characterized by the creed of mutual benefit brought about by welfare accumulation and free trade, protectionist tendencies emerged between the First World War and the Second World War. 1.2 Users of accounting information The purpose of accounting is to provide information for decision makers engaged in different types of economic decisions. It is defined as the language that conveys the financial information of corporate entities to users such as shareholders and managers to implement better financial decisions (Elliott and Elliott, 2011). Information about economic activities includes the information disclosed in the financial statements and the information is explained in the footnotes of the financial statements. This financial information targets both public sources (ie debt and stock markets) and private sources (ie non-market financing sources).Thesis In many economies, the main role of accounting information is the usefulness of the information to other stakeholders and objectives other than capital market decision-making (such as management and debt contracts). Stakeholders provide accounting information in the form of financial statements. Other audiences interested in these reports include: regulatory agencies that evaluate regulatory filings, standard-setting agencies that observe the use of accounting principles, and customers and suppliers interested in financial status and background. In addition, current and potential employees evaluate the possibility of working in these companies. On the other hand, NGOs (the voice of civil society) assess the company's position on environmental and social issues. This information is essential for people directly involved in and outside the organization. On the one hand, managers, shareholders, and employees analyze the profitability of the organization and the extent to which it can pay them salaries or payments in the form of dividends or stock buybacks. Nevertheless, the organization’s financial information is very important because it is useful for investors and creditors to determine the certainty of interest payments on loans. In particular, companies mainly raise funds through equity or debt. Finally, customers and tax authorities are interested in this type of information for different purposes: to assess the reliability of supply in long-term contracts and the tax liability of the collecting organization, respectively. The information provided is submitted to a qualitative test before the report. As a fact, it must contain all these characteristics: relevance, objectivity, time scale, verifiability, reliability, completeness, and fair representation. In addition, for data to be considered relevant, they must be objective and consistent (Elliott and Elliott, 2011). These qualities give decision-making usefulness. In fact, they provide guidance to decision makers, including those who manage the business and outsiders who assess future net cash inflows before making investment decisions. Read Less