Accounting Theory And Practice: Research Essay

Question:

Write about the Accounting Theory and Practice for Research.

Answer:

Bhp and Vale Edge Closer To $47.5 Billion Samarco Dam Disaster Settlement

BHP Billiton and Vale entered into a joint venture with Samarco for the purpose of building a dam. They initiated a preliminary agreement stating the process and timeline for settling the litigation in case of any mishappening. The dam felled injuring 16 people and 19 deaths including environmental damage. Further the agreement gives relief to companies by providing $US 675 million to recover losses. Samarco shall require numerous approvals to further carry on any activity. The case acquittal shall be declared on June 30, 2017 (Evlin, 2017).

Accounting Theory

The legitimacy theory states that the company shall understand its corporate social and environmental responsibility and disclose the mandatory information required by the public. The company shall understand the value of rules and norm made by the government and shall comply it accordingly. Suchman explained this theory as, “Legitimacy is a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions.” In case the company fails to act according to the social expectations then the company shall be restricted from doing its business activities until and unless the company itself provides justification through its social actions for the betterment of environment (Belal, 2008).

Analysis

As the legitimacy theory states that the organization shall disclose its environmental as well as social information in order to legitimate their legitimacy. It shall also take concrete actions with respect of the social guidelines (Bebbington, Larrinaga-Gonz?lez & Moneva-Abad?a, 2008).

In the given case of BHP and Vale, the joint venture of BHP and Vale with Samarco didn’t work well occurring in a dam disaster and leaving 19 people dead and 16 injured. As per the information disclosed by the organization about preliminary agreement, the companies shall provide initial security of USD 675 as remedy for affected areas. And the litigation defines the company Samarco shall be suspended for damaging the environment and shall further carry on its action with the approval of government only.

According to the analysis, the article totally relates to the legitimate theory as the article talks about the disaster occurred in Brazil and remedial measures taken by the organizations and government to resolve the issue (McWilliams, & Siegel, 2001). Further adding to it, the theory defines that the organizations shall voluntarily disclosed the vital information about the company which might affect the environment. Connecting to theory in the given case, BHP and Vale disclosed all the information of the preliminary contract in order to build trust in the society. The company also requires taking licenses from the government in order to start any commercial agreement with any other organization as well.

The legitimate theory emanates that the companies needs reveal its corporate environmental information and wok on them as well in order to maintain trust (Abrutyn, 2016). Similarly, in the case of BHP and Vale, the government obligated the companies the pay USD 675 million as security and USD 60 million to support environmental programs. This step was taken by government as well as companies to negotiate the damage done due to their negligence and for the betterment of public on a whole.

Conclusion

Following the litigation theory, the organizations need to be aware of its corporate social responsibility. The organization and government shall act in accordance with the rules and norms defined so that harmony is maintained in the society (O’Donovan, 2002).

References

Abrutyn, S. (2016). Handbook of Contemporary Sociological Theory. Switzerland; Springer International Publishing.

Bebbington, J., Larrinaga-Gonz?lez, C., & Moneva-Abad?a, J. M. (2008). Legitimating reputation/the reputation of legitimacy theory. Accounting, Auditing & Accountability Journal, 21(3), 371-374.

Belal, A. R. (2008). Corporate Social Responsibility Reporting in Developing Countries.USA; Ashgate Publishing Company.

Evlin, L. (2017). BHP and Vale closer to $47.5 billion Samarco dam disaster settlement. Viewed on 2 may 2017 from <

McWilliams, A., & Siegel, D. (2001). Corporate social responsibility: A theory of the firm perspective. Academy of management review, 26(1), 117-127.

O’Donovan, G. (2002). Environmental disclosures in the annual report: Extending the applicability and predictive power of legitimacy theory. Accounting, Auditing & Accountability Journal, 15(3), 344-371.

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