Accounting Theory and Telenet Annual Report 2011 (Essay Sample)

Accounting Theory
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Telenet Annual Report 2011
Materiality is the estimated importance of a transaction, amount, or discrepancy within accounting and auditing (Deegan, 2013). It is crucial for a firm to determine the most important environmental, social, and economic issues for the stakeholders, as well as the manner in which they interact with each other. A materiality matrix enables firms to choose which corporate social responsibility initiatives to invest in as a form of business development. The total value obtained from an investment in a corporate social responsibility can be broken down into two, societal value and business value (Deegan, 2013). The society value is the social or environmental benefits, which are achieved from investing in the corporate social responsibility. The business value can result from the favorable behavior from stakeholders as a result of the corporate social responsibility investment.
Telenet has created a materiality matrix, in which various issues have been highlighted but sorted out according to their relevance to the stakeholders. Telenet has identified 15 issues that are most relevant to stakeholders and will contribute towards the environment and social responsibilities. The main objectives of Telenet are enriching customers’ daily lives in a sustainable way and looking beyond the confines of the company. The most relevant five issues are providing a reliable service, customer satisfaction, clarity in pricing, user-friendliness of services and products, guaranteed security and privacy (Telenet, 2011). The issues stated in the materiality matrix cover the objectives and scope of Telenet sufficiently.
Telenet Annual Report contains information about network, competitive prices, growth, customers, services, and products. All these issues are also found in the materiality matrix of the company. Providing reliable service is one of the issues mentioned in the materiality matrix. This issue highlights the products and services that Telenet wants to offer their customer. Ensuring customer satisfaction is another issue in the materiality matrix, which is also discussed in the Annual Report. Telenet is committed to ensuring that all their customers are satisfied since a satisfied customer soon transforms into a loyal customer (Telenet, 2011). Telenet materiality matrix highlighted about guaranteeing security and privacy. Telenet’s customers must be assured that the connection they are using is safe. According to the materiality matrix, Telenet must clarify pricing of their products so that no clients will feel cheated. It is discussed in the Annual Report where Telenet claims that they will use competitive prices against their competitors.
Telenet’s report is not complete. A lot of information has been left out of Telenet’s Annual Report. Shareholders require that the key executive and directors’ remuneration be displayed clearly in a tabular form (Setia et al. 2015). Also, all non-financial and financial disclosures must be made. Telenet, have not disclosed all material information in the materiality matrix. A complete annual report contains information that is relevant to stakeholders, which may influence their assessment of the firms’ future and current economic value (Font, Guix, and Bonilla-Priego, 2016). Some of the information missing in the materiality matrix is about employees, regulations and government, media, third party, and agencies. A company must produce an integrated report, which is complete so that stakeholders have the accurate and necessary information they need. However, the company must consult the stakeholders first to ensure that the reports submitted are fully complete. If the stakeholders’ wishes are not kept, then the Annual Report will not be complete.
Telenet must complete their annual report for it to be completely helpful to their stakeholders. Firstly, employees have not been mentioned in the materiality matrix. It is a fact that when employees are happy, then their services are also good. Although employees have been mentioned in the Annual Report, its exclusion from the materiality matrix implies that the welfare of the employees is not a priority. Secondly, government and regulations have been excluded from the materiality matrix. Any company functions under an environment set by the government and must comply with the set regulations and laws. The company must also deal with the regulatory bodies and the interaction between the company and the government should be of interest to companies. Thirdly, the company must list the activities it will carry out jointly with the media. Few companies can survive without advertising, and a proper relationship must be established between the company and the media. Fourthly, Telenet has not listed any information about third parties. Stakeholders need to know about any dealings between the company and any other third party. Third parties help in talent retention and attraction while improving digital innovation. Lastly, the company must indicate all the agencies they are contracting with, as this is imperative. These agencies help the stakeholders assess the future of the company because of the types of contracts.
2. Integrated report
An integrated report is a voluntary and principles-based report (Adams et al. 2016). An integrated report must be future oriented and show a strategic focus. It will also have to show connectivity of information between the information presented in the report, for example, it must show connectivity between the flow of information between the past and the future. Moreover, Stent and Dowler (2015) claims that an integrated report will also indicate the stakeholders’ relationship with the company. Materiality is also an important aspect of the integrated report where it discloses information concerning issues that can affect the ability of the company to increase its value (Setia et al. 2015). An integrated report must be concise, reliable, and complete. The information presented in the integrated report must also be comparable and consistent. These principles make the integrated report to be a reliable document for many investors and stakeholders to the company. An integrated report has eight content elements as discussed below.
a) Organizational Overview
Under this section, the integrated report indicates the structure of the organization, its activities, and its external activities (Adams et al. 2016). The vision and the mission of the company are identified, and at the same time indicating key quantitative information. Factors that affect the organization significantly in the external environment are clearly stated and the response from the company given.
b) Governance
An integrated report also indicates how the company is governed. The section shows the leadership structure, processes taken for strategic decisions and the responsibilities of the management (Klettner, Clarke and Boersma, 2014). The incentives and remuneration are also specified as they are linked to the creation of value in both short and long term. It also shows the particular actions the management have taken to monitor and influence the strategic direction of the company.
c) Business model
An integrated report must also specify the business model that is being applied by the company. It describes inputs, business activities, outputs, and incomes. The integrated report must explicitly identify key elements of the business model. A diagram followed by a logical narrative flow of all the activities can support the description (IIRC, 2013). Important factors, such as those influencing the external environment are critical for stakeholders.
d) Risks and opportunities
An integrated report must indicate the specific opportunities and risks that affect the ability of a company to increase its value (Cheng et al., 2014). These opportunities and risks must be specific to the company and can even indicate their specific source. The integrated report should also indicate how the company assesses the likelihood of the opportunity or risk-taking place. Lastly, it must clearly state the steps the company is taking to reduce the risks facing the business.
e) Strategy and resource allocation
This section of the integrated report shows where the company is planning the future and how it will get there (Stent and Dowler, 2015). The short term, medium term, and long-term objectives are stated and the resource allocated to ensure the objectives are achieved. The strategy must relate to the business model and the changes that must be effected on the business model to implement the strategy.
f) Performance
The performance of the company is shown in the past, present and how it is expected to perform in the future. Quantitative indicators of risk, opportunities, and targets are given with an explanation of their implications, and assumptions and methods used to calculate them (IIRC, 2013). This section also shows the state of the relationship between the company and major stakeholders, and how the company responds to their needs.
g) Outlook
The outlook of a company shows the uncertainties and challenges that are expected to face the company as they pursue their strategy and try to achieve their objectives (IIRC, 2013). The potential consequences of using the business model on future performance are stated in this section. The set objectives and expectations must be achievable.
h) Basis of preparation and presentation
An integrated report must give the basis of presentation and preparation of what is included in it. This report must have a summary of how materiality matrix was arrived at (Veltri and Silvestri, 2015). A summary of methods and frameworks used to evaluate or quantify material is important. There must be a brief desc...