Assignment: Case study

Requiring assistance for Q4-5 (300 words each)

Refer to Module 2 Topic 1 for Q4

Accounting in Organisations and Society Individual Assignment: Case Study This assignment is worth 30% of the total assessment for this course. Length: This assignment is comprised of five questions. You MUST answer all questions. The total word limit is 1500 words with each question of approximately 300 words. The word count does not include the list of references. Release Date: 8:00 AM, Monday, 20 March, 2017 (Melbourne time) Due Date: 11:59 PM, Sunday, 30 April, 2017 (Melbourne time) Submission Filename: Please name your assignment in the following manner: your last name, your first name, and your student number, for example: BondJames3123007. Submission Covering Pages: You must ensure the first page of your assignment contains: your full name, student number, tutorial time, and tutor's name. Formatting: Times New Roman, 12 point font, single spacing, minimum 3 cm margin on left and right side of paper. Submission via Turnitin Dropbox: You must submit your assignment via the 'Individual Assignment Submission Semester 1 2017 Drop Box', available in the Assignments tab on Blackboard. Reference: Full referencing (in-text citation and reference list) is required for this assignment. Please follow RMIT Harvard referencing style. The referencing guide is available on the RMIT Library website: http://www1.rmit.edu.au/browse;ID=8rwjnkcmfoeez Others: Frequently Asked Questions will be posted on the assignment FAQs section available on Blackboard. Formatting and Reference are worth 5 out of 30 marks, refer to marking rubric for details. It is your responsibility to ensure that you have submitted the assignment correctly and is available for marking via Turnitin by the due date. 1 Background Computers in many forms are an important part of our life. However, do you know the life stages of a computer? The life of a computer can be summarized into the following stages. The initial stage is the extraction of mineral resources from the earth. The second stage is to manufacture these minerals into different parts of a computer through various processes. The computers are then packed and transported to different locations in the world to be sold to individuals and businesses. At some stage in its life it may need to be repaired when it malfunctions. At the end of its life, the parts of a computer may either be recycled or go to landfill. It should be noted that computers have some social and environmental impacts. For instance: some mineral resources are non-renewable and also damage the environment on their extraction. manufacturing often happens factories in developing countries where there are cases of workers including young children getting exploited. packing computers involve a significant amount of Styrofoam and cardboard which have their own environmental impact. the transport of computers for thousands of kilometers has an environmental impact in the form of large amount of carbon emissions the use of computers requires electricity, which may be produced from coal, petroleum, or natural gas etc. In recent years, an increasing number of companies have become more aware of the importance of sustainable development and are making solid efforts to reduce their social and environment impacts. For example, Dell - one of the largest computer corporations - aims to develop its business in a sustainable way. More information can be found from the Dell 2020 Legacy of Good Plan. In this plan, Dell is committed to contribute in a positive way to the environment (e.g. reducing greenhouse gas emissions), communities (e.g. providing grants) and people (e.g. maintaining a good relationship with worldwide fellow team members). In addition to this program, Dell features a technology recycling program, which gives discarded electronic devices a new life through re-use or by recycling them. Dell became the first computer company that does not export e-waste to developing countries for landfill. Assignment Tasks Assume you are a newly appointed accountant in a local computer company. This is a private company with 30 shareholders, and it has a highly integrated industrial value chain. Currently, the company has 6 departments namely, the Research and Development, Manufacturing, Finance, Sales and Marketing, Distribution and Human Resources department with a total of 150 employees. Managers in each department are given the authority regarding operational decisions and their performance is measured based on the company's profit. In order to cut down costs, the manufacturing department manufactures 2 computers locally using parts that are mostly imported from different suppliers in Bangladesh and China. Recently, the manufacturing department manager heard that some of their suppliers are exploiting their workforce in order to produce these parts. These workers are forced to work long hours in unsafe working conditions on very low wages. The former accountant is unsure who should be responsible to ensure the quality of working conditions and wages to the local staff of suppliers and so she has decided to ignore it. As well as the manufacturing manager, the CEO of this company has noticed the unprecedented awareness from customers on the company's social responsibilities. Many customers expressed the idea that they would not purchase any unethically produced or environmentally unfriendly products. So the CEO is passionate about the social and environmental issues, and wonders what positive or negative social and environmental impact his company's computers might have. Required 1. As a newly appointed accountant, you would like to have a better understanding of the new company. You believe the most efficient way is to identify important stakeholders. Identify five relevant stakeholder groups and discuss how different accounts could be used to satisfy each group's information requirements. 2. Regarding the social and environment issue, you found the major difficulty faced by the CEO is to identify the direct and indirect social and environmental impacts of the company's operations. You have been asked to assist the CEO with this task and are required to draw the supply chain, and select one or two stages, identifying a total of four possible social and environment impacts. If the impact is detrimental either socially or environmentally, give suggestions to minimize the impact. If the impact is positive, give suggestions as to maximize the benefit. 3. After the CEO has discussed his view on social and environmental awareness of customers, the manufacturing department manager approaches you to seek your advice on whether an investigation into the working conditions of the factories of their overseas suppliers should occur. You believe that the manager should take action immediately as it is important to work with ethical suppliers. Give either one or two real life examples to discuss how a business could be negatively impacted if they are working with unethical suppliers. 4. The CEO is considering an investment of $1m to establish a sustainability department. The CEO uses the five step process (see Module 2 Topic 1) to make decisions, and is wondering how you as an accountant could assist in the decision making process. Advise the CEO on how you can assist with his decision making. Be specific and in your response make reference to the five step process. 5. Subsequently a plan to establish a sustainability department is agreed upon. Some important shareholders attempted to block this proposal. Their belief as the owners of this company is that the company should aim to maximize the value of their 3 shares, however, the new sustainability department could significantly increase the costs and therefore reduce the profit. Think of a potential sustainability project and explain whether and how that project could potentially increase the value of their shares in the long term. Further, discuss how value could be created for other stakeholders (if any) when the project is implemented. Additional resources: The additional resources below will help you understand and prepare your assignment. However, you still need to read through the topic notes, suggested textbook readings and use other sources, such as news outlets, journal articles and websites to develop your answer. Story of stuff project, 2010. The story of electronics, YouTube, viewed 3 Feb 2017, . University of Michigan, 2017, Life cycle of a computer, University of Michigan, viewed 3 Feb 2017, . Dell, 2012, Dell 2020 Legacy of Good Plan, Dell, . viewed 3 Feb Dell, 2017, Dell recycling, Dell, viewed 3 Feb . 2017, 2017, 4 Accounting in Organisations and Society Module 2 - Accounting and its role in managerial activities Topic 1: Setting the scene Topic Notes Topic 1: Setting the scene By Craig Deegan RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Accounting in Organisations and Society Disclaimer This subject material is issued by RMIT on the understanding that: 1. RMIT, its directors, author(s), or any other persons involved in the preparation of this publication expressly disclaim all and any contractual, tortious, or other form of liability to any person (purchaser of this publication or not) in respect of the publication and any consequences arising from its use, including any omission made, by any person in reliance upon the whole or any part of the contents of this publication. 2. RMIT expressly disclaims all and any liability to any person in respect of anything and of the consequences of anything done or omitted to be done by any such person in reliance, whether whole or partial, upon the whole or any part of the contents of this subject material. 3. No person should act on the basis of the material contained in the publication without considering and taking professional advice. 4. No correspondence will be entered into in relation to this publication by the distributors, publisher, editor(s) or author(s) or any other person on their behalf or otherwise. All details were accurate at the time of printing. March 2017 RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page i Accounting in Organisations and Society Table of Contents Learning Objectives ..................................................................................................... 1 Different stakeholders have different demands for information ................................... 2 So, what does management do? ................................................................................. 4 The accountants as part of the management team ..................................................... 4 The accountant's role in managerial activities ............................................................. 5 Planning: key factors to consider ................................................................................ 5 Planning: planning as a continual process .................................................................. 6 Planning ...................................................................................................................... 6 Planning: managers and accountants need to think about the 'long term' .................. 7 Planning: value creating within an organisation .......................................................... 8 Planning: the role of the accountant in adding value- further considerations .............. 9 Planning: components of an Organisation's plan ...................................................... 11 Organising: value drivers and resource allocation .................................................... 13 Organising: competency of accountants ................................................................... 15 Summary ................................................................................................................... 17 References ................................................................................................................ 20 RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page ii Accounting in Organisations and Society Learning Objectives By the end of this topic you should be able to: Explain that there will be many relevant items of information about an organisation (an 'information pool'), which might serve multiple purposes for multiple stakeholders. Provide a general description of the functions of managers. Explain that the accountant is a key part of the management team. Explain the vital role of planning in helping an organisation succeed. Explain the meaning of a 'resource'; Explain that managers/accountants need to focus on various facets of Organisational performance, and need to consider both the short term and long term implications of their decisions. Explain the ways in which accountants can 'add value' to an organization, and to the stakeholders of the organisation. Be able to identify some 'drivers' that will assist an organisation in creating value. Describe some key competencies that accountants should possess if they are going to 'add value' to an organisation and its stakeholders. Provide an overview of what components make up an Organisational plan. Suggested Reading Management Accounting in Context, 2014 in Horngren, Charles T., Datar, Srikant M., Rajan, Madhav V., Wynder, Monte B., Maguire, William A. A. & Tan, Rebecca C. W., Cost accounting: a managerial emphasis, 2nd ed., Pearson Australia, Frenchs Forest, NSW, pp. 6-14. The International Federation of Accountants (IFAC), 2011, Competent and Versatile: How Professional Accountants in Business Drive Sustainable Success. http://html5.epaperflip.com/?docid=e2b154a4-7900-40f7-99c8a53a013ce14f#page=1 RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 1 Accounting in Organisations and Society Opening Question Accounting is expected to 'create value' to an organisation. In this regard: What might we mean by 'create value'? As part of an organisation, how can accounting 'create value' to the organisation and the stakeholders of the organisation? Different stakeholders have different demands for information The majority of introductory accounting textbooks start with the front half of the book addressing financial accounting for external stakeholders and then conclude with the second half of the book addressing management accounting for internal stakeholders. In this course we will not provide a somewhat artificial delineation between management accounting (information used internally for managing an organisation) and financial accounting (financial reports used by external parties, such as shareholders and creditors). This separation is artificial as, for example, much of the information generated on product 'costs' (however determined) - which is often classified as a component of management accounting - has relevance to stakeholders inside and outside the organisation, whether this information be about financial costs, environmental costs or social costs. Further, much planning (and collection of information) occurs before we are in a position to report the results by means of financial accounting (which tends to report on an 'afterthe-fact' basis). Hence discussing financial accounting (with its emphasis on actual profits and cash-flows) prior to other aspects of 'accounting' seems to be somewhat inconsistent with reality. Therefore, whilst much of the material in this module has traditionally been classified as belonging to 'management accounting' we will acknowledge that much of the information that is necessary for managing a business also has relevance to stakeholders not directly involved in the management of the organisation. Whilst many external stakeholders will have an interest in information used internally, for proprietary or competitive advantage reasons, such information might not be shared with external parties. The achievement of some of the organisation's goals might be dependent upon keeping particular information away from competitors. Moderating this disinclination to 'share' information will be considerations of stakeholders' 'rights-to-know' and regulative requirements for disclosure (for example, RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 2 Accounting in Organisations and Society emissions of certain substances must be disclosed pursuant to regulation despite the negative implications that might result in terms of organisational reputation). Also, certain 'powerful' stakeholders will be able to access information not necessarily made available to other stakeholders. For example, information about the following will be of relevance to many different stakeholders: The organisation's actual and projected performance (financial, social and environmental, with performance evaluation being influenced by whether the organisation is 'for profit', 'not-for-profit', community-based, etc.), The organisation's control of resources, The organisation's resource usage, Organisational impacts (which can include economic, social and environmental impacts), Compliance with organisational goals, regulations and/or particular stakeholder expectations, Implications of future plans, and so forth, on various stakeholders including 'the environment'. The different stakeholders with such interests might be internal or external. Therefore, it is somewhat artificial to say that particular information is only relevant to internal stakeholders (e.g., managers), or to external stakeholders (e.g., shareholders). In effect, there will be a 'pool' of information to draw upon which will be of interest (or not) to a variety of stakeholders. Some items of information will have multiple uses/purposes. Review Questions Following from the previous section, think of some specific pieces of information that would have multiple uses for multiple stakeholders (both internal and external). Identify information that would be useful for management purposes, but would not be disclosed externally because of potential damage to commercial advantage. RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 3 Accounting in Organisations and Society So, what does management do? In order to understand the type of information that will be beneficial to managers, we first need to understand the role and responsibilities of the manager. Generally speaking, management: Plans: What does the organisation want to do/achieve? Organises: How does the organisation achieve its goals, plans? Makes decisions: Determining the best course of action amongst alternatives. Monitors performance: How is the organisation performing relative to what it wanted to achieve? Revises plans in light of performance/feedback: (and the cycle continues.) The accountants as part of the management team The accountant has a role in all of the above activities. Accountants are effectively 'gatherers' of information. Professional Accountants are trained in the discipline of collecting relevant information and compiling reports/'accounts' that create value to the organisation (accounting). According to IFAC (2011,p.6): Professional accountants in all organizations have a significant role in: Faming business models; Challenging conventional assumptions of doing business and redefining success in the context of achieving sustainable value creation; Encouraging and rewarding the right behaviours; Ensuring that decisions are supported by the necessary information, analysis, and insights; And ensuring that monitoring and reporting performance go beyond the traditional ways of thinking about economic success. Web Resource IFAC website can be accessed through the following link: https://www.ifac.org RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 4 Accounting in Organisations and Society The accountant's role in managerial activities Planning: key factors to consider Planning is central to managing a business. Planning should be a continuous process, which should start well before an organisation commences operations. The plan provides a benchmark against which future performance can be assessed. Various factors will feed into an organisation's plan, such as: The organisation's mission. Available resources (including human resources) and alternative locations of resources. Various stakeholders' expectations (current and projected). Current and future technologies. Economic, social and environmental implications of various strategies. Existing and projected regulations. RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 5 Accounting in Organisations and Society Planning: planning as a continual process Once plans have been developed they need to be implemented with related activities (and 'costs') being monitored and controlled for compliance with standards/goals that were established and opportunities for improvement to processes need to be continuously considered. In light of performance and experience processes that can be improved, previous plans can be revised, and new plans established. Feedback from interested stakeholders can also be used in terms of how they have responded to the actual process/outputs of the organisation. For example, the use of stakeholder surveys/social audits. Planning In performing managerial duties, broader issues of 'sustainability' need to be incorporated within organisational strategy. According to IFAC (2011, p. 6): Sustainable development and the sustainability of organizations have become mainstream issues for politicians, consumers, and business leaders. From an economic, as well as an environmental and social perspective, sustainability issues are transforming the competitive landscape, forcing organizations to change the way they think about products and services, technologies, processes, and business models. Long-term sustainable value creation requires responsible organizations to direct their strategies and operations to achieving sustainable economic, environmental, and social performance. It also requires incorporating wider stakeholder perspectives and issues into decision-making. Ensuring that organizations pursue sustainable business models and development practices will require radical changes in the way they do business. Achieving a sustainable future is possible only if organizations recognize the role that they can and need to play. Effective action by the accountancy profession and professional accountants to better integrate and account for sustainability is an essential part of the response. Governing bodies and organizational Governing bodies and organizational leaders should be focused on the long-term sustainability of their organization, and they should be confident that their business models will deliver this. Extending the focus of performance beyond the 'financial'. According to IFAC (2011, p. 8): A narrow focus on financial performance, such as short-term earnings and profits, at the expense of social or environmental performance can result in a loss of trust in an organization and damage overall performance, resulting in value destruction for all stakeholders, and, in some cases, losing its license to operate. RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 6 Accounting in Organisations and Society Issues of human rights; corruption and bribery; non-compliance with labour and environmental standards and responsibility; and discrimination in respect to employment and occupation can be as important to the long-term prospects of larger, publicly owned organizations, as well as to smaller organizations. Example The Exxon Valdez oil spill occurred in Prince William Sound, Alaska in 1989, when Exxon Valdez, an oil tanker bound for Long Beach, California, struck Prince William Sound's Bligh Reef and spilled 11 to 38 million US gallons of crude oil over the next few days. It is considered to be one of the most devastating human-caused environmental disasters. This disaster resulted in the International Maritime Organization introducing comprehensive marine pollution prevention rules (MARPOL) through various conventions. It can be accessed via the following link: http://www.imo.org/en/About/Conventions/ListOfConventions/Pages/Interna tional-Convention-for-the-Prevention-of-Pollution-from-Ships(MARPOL).aspx Also, as a result, CERES Principles, 10-point code of corporate environmental conduct, were announced. Since then, over 50 companies have endorsed the Ceres Principles, including 13 Fortune 500 companies that have adopted their own equivalent environmental principles. They can be accessed via the following links: https://www.greenbiz.com/blog/2010/05/28/bps-moment-truth https://www.ceres.org/about-us/our-history/ceres-principles Planning: managers and accountants need to think about the 'long term' According to IFAC (2011, p. 9): The need for short-term results can distract managers from their long-term vision. Defining the long-term and embedding it into operations in a meaningful way can be complex. Pressures to focus on the short term - for example, through periodic (12 month) reporting of profits and managerial bonuses based on yearly profits or sales - all increase the pressure to focus on the short term. RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 7 Accounting in Organisations and Society Review Questions Assume a manager of a company that undertakes a lot of research and development (R & D) is approaching retirement. The manager has a major say in determining whether particular R & D projects should be commenced. The average project is in the R & D phase for four years before it generates income. During this time, the costs associated with the R & D reduce the profit of the company. The manager receives a fixed salary of $250,000 plus an annual bonus which is 2% of annual profit. Question: Do you think it is a good idea that the manager still receives the bonus particularly given that the manager is approaching retirement? Planning: value creating within an organisation At its core, an organisation would be expected to create 'value' for various stakeholders who might include owners, customers, employees, suppliers, suppliers' employees, community-based groups, and the 'environment'. The value creation should ideally occur in an ecologically and socially sustainable and responsible manner (and the community is increasingly expecting this to be the case). This value creation is achieved by utilising various resources in a way, which leads to desirable outcomes. And what is deemed 'desirable' might evolve across time. Porter (1985) describes the sequence of activities undertaken by an organisation as a 'value chain'. Well performing organisations create relatively more value from the various steps involved in acquiring and transforming resources into products and services. Greater efficiency creates greater value. Value creation requires clear vision, strategy, and planning. Value creation relies upon well-functioning corporate governance (with corporate governance referring to processes/policies/systems in place to help ensure an organisation meets its objectives). RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 8 Accounting in Organisations and Society Figure 1: Porter's Value Chain YouTube Resource Do you know what a value chain is? The following video could give you some ideas. https://www.youtube.com/watch?v=g8p2H7EvoGM Planning: the role of the accountant in adding value- further considerations We have already discussed the role of the accountant in adding value. A report by IFAC (2011) entitled 'Competent and Versatile: How professional accountants in business drive sustainable organizational success' notes (p. 15): What Roles Do Professional Accountants in Business (PAIB) Perform: The roles professional accountants perform can be described as creators, enablers, preservers, and reporters of sustainable value for their organisations in both performance and conformance* dimensions: As creators of value, by taking leadership roles in the design and implementation of strategies, policies, plans, structures, and governance measures that set the course for delivering sustainable value creation. RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 9 Accounting in Organisations and Society As enablers of value, by informing and guiding managerial and operational decision making and implementation of strategy for achieving sustainable value creation, and the planning, monitoring, and improvement of supporting processes. As preservers of value, by ensuring the protection of a sustainable value creation strategy against strategic, operational, and financial risks, and ensuring compliance with regulations, standards, and good practices. As reporters of value, by enabling the transparent communication of the delivery of sustainable value to stakeholders'. *Conformance can be defined as: Certification or confirmation that a good, service, or conduct meets the requirements of legislation, accepted practices, prescribed rules and regulations, specified standards, or terms of a contract. Hence, accountants do more than just provide accounts of past financial performance. They are expected to 'add value' to the organisation, and the 'better' the accountant, the 'greater' the value-add. This can be diagrammatically represented as follows: Figure 2: The Roles and Domain of Professional Accountants in Business RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 10 Accounting in Organisations and Society Review Questions Provide examples of how the accountant can add value in each of the different roles just described. Questions The previous notes discussed the notion of an organisation 'creating value'. Creating value is a core responsibility of management. From what/whose perspective should we assess value? Is there an objective/absolute answer to such a question? What if an action increases the supply of particular materials for manufacturing and effectively increases the wealth of workers and employees but causes environmental damage - is this 'creating value'? What if a supermarket introduced self-service check-out machines to enable them to reduce staff numbers, and wage costs and therefore to increase 'profit' and therefore dividends for shareholders - is this 'creating value'? Hints: We consider the issue here of corporate social responsibility. Planning: components of an Organisation's plan We have briefly discussed the role of planning. We will now consider some of the components of an organisation's plan. Overview /description of the business What does the organisation want to do and achieve and where does it want to do it? Who are its key stakeholders/customers? Why are they key stakeholders? Who are the key personnel and their roles/expertise? RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 11 Accounting in Organisations and Society Financial Plan What are the funding requirements and what are the potential sources of funding? What are the projected cash flows in the various phases of operations? What is the projected financial performance of the organisation? What budgets need to be prepared? (For example, sales (service revenue) budget, operating expenses budget, purchases budget, manufacturing overhead budget, administrative overhead budget, advertising budget, capital acquisition budget, cash budget?) Marketing Plan Current competition Expected competition Expected demand Factors likely to influence demand Mechanisms in place to make the most of market opportunities and to assess changes in the market. Social and environmental management plan Must operate in a socially and environmentally responsible manner What are the key social and environmental impacts generated from potential activities? How were these impacts assessed? Determine the extent of the impacts to be assessed in terms of importance of including supply chain considerations Life-cycle analysis Operating plan Necessary actions to succeed and protect market position (including need for copyright/patents/trademarks etc.) Key suppliers/supply chains Required employees Implications of regulations Stakeholder expectations and related engagement policies RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 12 Accounting in Organisations and Society All of the above plans would all be highly inter-related and no components can be considered in isolation from the others. Changes in plans would feed through to changes in other components of the planning. For example, a change in the social and environmental management plan (for example, it is decided that the workplace safety of employees within the supply chain needs to be assessed as part of a purchase decision) could have implications for financial issues, marketing, and operations. If we consider the previous notes, we will see that the process of planning requires the collection/capture of vast amounts of information. Some of this information will be financial and some will be non-financial. Some information will relate to the resources of the organisation whilst other information will relate to impacts beyond the organisation. Consideration of numerous potential impacts should be considered as part of the resource allocation decisions. Organising: value drivers and resource allocation Thakor et al (2001) also noted that 'value creation' - which is an important focus of accountants - will be influenced by: Culture and leadership styles in place. Management's willingness to collaborate. Preparedness to be innovative. The level of efficiency being embraced. Awareness of market opportunities and changes therein. The determination of what influences value will in turn impact: The way resources are used. The way performance and resource usage is measured and associated rewards determined. For example, if an organisation has a goal of reducing the amount of water being used within an organisation, or the amount of CO2 being emitted then managers with an ability to influence these outputs might be rewarded financially if they can achieve particular reduction targets (which themselves would be reported in particular accounts prepared by an 'accountant'). RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 13 Accounting in Organisations and Society Review Questions Tight-tops Ltd outsources' the production of shirts to an unrelated organisation in Indonesia. It believes that one way it can 'add value' to what it does is to improve the health and safety of the employees in the Indonesian factory. Question: How might the accountant assist this quest to add value? According to IFAC (2011) there are eight drivers of sustainable organisational success, that provide the basis for understanding how the global accountancy profession needs to support the development of professional accountants, so that they can help organisations achieve sustainable value creation. The drivers are summarised in the following figure. Figure 3: Drivers of Sustainable Organisational Success (Source: IFAC, 2011) RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 14 Accounting in Organisations and Society Organising: competency of accountants The 8 drivers of organisational success - as described by IFAC (2011) - require accountants to have particular core competencies as described below. Figure 4: Expected Key Areas of Competency for Professional Accountants in Business (Source: IFAC, 2011) RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 15 Accounting in Organisations and Society (Source: IFAC, 2011) Review Questions We earlier noted that accountants have a role in encouraging and rewarding the 'right behaviours'. What mechanisms might an accountant help put in place to encourage an organisation to reduce its consumption of electricity (which we might assume is predominantly sourced from coal-fired power stations)? RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 16 Accounting in Organisations and Society Summary In this topic, we considered: In the topic that follows we will consider: RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 17 Accounting in Organisations and Society Review Questions Case Study: DC Surf Co. Download video: https://smoovivideov1.s3.amazonaws.com/11fce144-8af0e234_7452.mp4' Background: De and Claire studied a business course together 5 year ago. De majored in Marketing and Claire majored in International Business. They met through the University Surfing Club. De works full-time as a marketing Assistant for a major retailer. On the weekends he shapes surfboards in his shed. It started out as a hobby but he has now started selling his boards in a few local surf shops. Claire works part-time for a graphic design firm. She also designs her own tshirts and sells them online. She currently ships her t-shirts to 7 different countries throughout South East Asia as well as the US. De and Claire surf together a couple of times a month and often talk about starting a business together. Finally, they have decided to take the plunge and have set up 'DC Surf Co' with the vision of supplying high quality surfing equipment and apparel. They have decided to start small but have plans to grow quickly. For now, they are operating from a small home office in De's lounge room. De and Claire decided to set up their business as a partnership. They employed De's neighbour Johnny on a part-time basis to assist with setting up the website and other administrative tasks so that De and Claire can focus on growing the business. De already had a relationship with a few of the local surf shops and they have agreed to stock the full range of DC Surf Co boards and apparel. They have also started selling their goods online through their website. They have made a few bulk purchases of materials (fiberglass, cotton, fabric) and are storing these in De's lounge room. They realise that they are quickly running out of space and expect to either rent or purchase commercial premises within the next 6 months. De and Claire considered restructuring the business from a partnership to a company. They initially set up the business as a partnership because it seemed to be the easiest and least expensive option but they then wondered if perhaps they made the decision in haste and should have researched business structures more thoroughly before making their choice. After further consideration, they restructured the partnership into a company. RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 18 Accounting in Organisations and Society A large surfboard manufacturer has recently received negative media attention for importing their surfboards into Australia from China where the workers are subject to unsafe working and poor wage conditions. DC Surf Co have noticed that a lot of potential customers are now enquiring as to how and where DC Surf Co makes their boards. De is still manufacturing his boards locally and has now employed one experienced staff member and one trainee to assist him. Prior to the recent media attention, no-one really asked about the origins of the boards and De has never made an effort to voluntarily provide this information. Additional Information De decided to label his locally made boards with a sticker which says \"designed and made locally in Australia\". Since promoting his boards as locally made, De has noticed a significant increase in sales but is finding that most of this extra money is being used to purchase materials and pay staff wages. De isn't sure how well the business is performing and how he should best go about improving the performance of the business. He came across this article about how to make a living as a surfboard maker and has decided that he and Claire should develop a business plan for their business. De also thinks that they should hire an accountant to assist them in their business but Claire isn't convinced that this is necessary and is worried about the extra cost. They decide on a compromise which is to advertise a position for a part-time accountant to work in the business 2-3 days per week. Activity 1: You have decided to apply for the role and are in the process of preparing your application. As part of the process you are required to answer a series of questions. The first of these questions asks: Complete the table below by identifying five specific pieces of information you would collect in your role as an accountant at DC Surf Co, identify which stakeholders this information would be reported to and for what purpose this information might be used. Specific Information Stakeholder(s) Purpose(s) Activity 2: You have been shortlisted for the role and have secured an interview. At the interview, Claire seems reluctant to employ an accountant. She asks \"how can an accountant add any value to our business?\" Prepare a response to Claire's question with specific reference to the additional information provided above and the accountant's role in business planning. RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 19 Accounting in Organisations and Society Activity 3: Congratulations! You got the job! To assist De and Claire with their business plan, you are required to understand how Porter's Value Chain relates to their business. Use the information you have been provided so far in the case study and conduct your own research on the surfing industry to construct a diagram of the DC Surf Co value chain. References Ceres, n.k. The Ceres Principles, Accessed 3 Feb, 2017, https://www.ceres.org/about-us/our-history/ceres-principles International Maritime Organisation (IMO), n.k., International Convention for the Prevention of Pollution of Ships (MARPOL). Accessed 3 Feb, 2017, http://www.imo.org/en/About/Conventions/ListOfConventions/Pages/Inter national-Convention-for-the-Prevention-of-Pollution-from-Ships(MARPOL).aspx Porter, 1985 Competitive Advantage: Creating and Sustaining Superior Performance, New York: Free Press. The International Federation of Accountants (IFAC), 2011, Competent and Versatile: How Professional Accountants in Business Drive Sustainable Success. Accessed 3 Feb, 2017, http://html5.epaperflip.com/?docid=e2b154a4-7900-40f7-99c8a53a013ce14f#page=1 Tulay, M., 2010, BP's Moment of Truth, GreenBiz, Accessed 3 Feb, 2017, RMIT University Accounting and its role in managerial activities Topic 1: Setting the scene Page 20