The Manner in Which Information Is to Be Reported

The manner in which information is to be reported

The Trueblood Report considered social accounting to be one of the objectives of financial reporting. The National Association of Accountants (USA) subsequently carried out a survey in 2004 among 695 of its members, which revealed that 71 per cent of respondents agreed that a system of accounting for corporate social performance was needed. In addition, 90 per cent of respondents identified a need for descriptive and numerical, that is non-monetary and monetary, measurements of social performance. Such evidence indicated that accountants were beginning to reflect the views which management in the USA were already adopting with regard to the importance of corporate social activities.

A survey of the approaches adopted by firms to the problem of social reporting has revealed that three basic approaches are employed (Epstein et al.. 2006; Parker, 2018).

(1) The descriptive approach appears to be the most prevalent form of corporate social reporting. Descriptive social reports merely list all corporate social activities, and are the simplest and least informative format for social reporting. Descriptive reports have ranged from short sections in the Annual Report to Shareholders to quite separate publications dealing with corporate social responsibility. Many companies which have used the descriptive approach to social reporting have done so in the belief that useful measurement of corporate social performance cannot be developed.

(2) The cost of outlay approach lists corporate expenditure on each social activity undertaken, and offers a contrast to the descriptive reports in the sense that the descriptions of activities are quantified in money terms. One advantage of the cost of outlay approach to social reporting lies in the comparability achieved between successive years in the level of financial commitments to social activities. The main disadvantage of this approach is that no mention of the resulting benefits is made. In this respect, the size of the financial outlay is not necessarily related to the benefits yielded. Thus, large expenditure may be incurred on training programmes that are ineffective.

(3) The cost-benefit approach discloses both costs and benefits associated with corporate social activities. This approach is the most informative, but suffers from the difficulties which exist in the measurement of the benefits. Critics of this approach assert that output measures in money terms are contrived and are not meaningful, because the benefits are mainly of a qualitative nature for they are concerned with the quality of life.

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Read on: The Analysis of the Social Audit

The analysis of the social audit

The analysis of these activities in relation to such internal and external circumstances sheds further light on the nature of the social problems to which the corporate social policy should be directed. This analysis is a pre-condition to considering the type of social programmes which may be required.

Evaluating and selecting social programmes

The selection of social programmes will be influenced by the firm's current performance and views about that performance. One approach to this problem is to carry out 'attitude surveys' (Worcester,... see: The Analysis of the Social Audit