Review article
https://doi.org/10.22598/iele.2020.7.2.9
FROM FINANCIAL TO “SUSTAINABLE” CAPITAL MAINTENANCE
Clemence Garcia
; Gakushuin University, Faculty of International Social Sciences, Tokyo, Japan
Abstract
How should corporate sustainability be addressed in financial reporting? This research investigates the potential use of capital maintenance as a framework to develop sustainability reporting. Its claim is that the disclosure of capital should be reconsidered to strengthen corporate accountability. After conducting a historical review of capital maintenance theories, three purpose-oriented treatments are identified: the net assets, dynamic and sustainable views. From the viewpoint of stakeholders’ information and corporate social responsibility, disclosure based on the sustainable capital maintenance view would enhance transparency. Furthermore, it would provide a measurement basis that currently lacks for subsequent regulation of corporate behavior. Consistently, relevant accounting methods should be developed to complement the loopholes of modern reporting standards. The claim of this research is that sustainable capital maintenance could be implemented by defining and disclosing three key elements of equity: capital contributed by shareholders, retained earnings, and a sustainability reserve, which would reflect the financial assessment of future environmental and social risks. Since this reserve would only affect the allocation of retained earnings and not the measurement of performance, it would be compatible with international financial reporting standards.
Keywords
Capital Maintenance; Capital, Net Assets; Corporate sustainability; corporate social responsibility; company law; international financial reporting standards; accounting; financial reporting
Hrčak ID:
250351
URI
Publication date:
31.12.2020.
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