Accounting Theory for Deepwater Horizon Oil - MyAssignmenthelp

Question: Discuss about theAccounting Theory for Deepwater Horizon Oil. Answer: Introduction This study deals with analyzing the incident on Deepwater Horizon Oil Spill that was caused by the company named as British Petroleum (Paul et al., 2013). The study had brought out all the information that pertains to judicial facts as well as numbers relating to accounting laws and financial implications where penalties had been charged against British Petroleum for Deepwater Horizon Oil Spill as it harmed society and aquatic ecosystem as a whole. The main objective of the study is to highlight the harm done by deepwater Horizon Oil spill and to show the reaction of companies who are copying up the same through introducing these strategies so that they replace their existing eco-safety machines in place of that. The present segment explains the details about the escrow account that will meet their contingent liabilities in accordance with the legal requirement. In addition, the study highlights on the major information on matters relating to fines and penalties that are enforced on Deepwater Horizon Oil Spill as well as liabilities that are of uncertain nature for the penalties. The study gives detailed information on matters relating to direct as well as indirect impact on the ecological and sociological services that can be noted from the Gulf of Mexico. In that case, the incident Deepwater Horizon Oil Spill had made it a mandatory requirement to look into the ecological as well as sociological services by every organization that are present in Mexico and the Government as a whole. Therefore, this study highlights several discussions as well as provides recommendations at the end that will depict true impact of Deepwater Horizon Oil Spill (Osofsky et al., 2016). Points of Discussion There have been so many debates that argue for and against to the topic of worst environmental disaster ever named as Deepwater Horizon Oil Spill. This disaster happened just because of ineffective ecosystem that was implemented by British Petroleum (Michel et al., 2013). The accident Deepwater Horizon Oil Spill renders detailed information on all fines and penalties that are enforced on the Deepwater Horizon Oil Spill as well as liabilities that are of course uncertain by nature for the legal fines. British Petroleum was at fault as they failed to disclose relevant facts as well as details on matters relating to ecosystem and environmental support system where they could have found ways to minimize the harmful impact on their company. In the later stage, the company had even implemented new ecosystem that remained unproductive as well as fails to give any positive effect for the company. Deepwater Horizon Oil Spill had harmed the ecosystem as well as financial position of the compan y as a whole. In the year 2009, total profit generated by British Petroleum amounts to $6947 million that had adversely reduced to loss of $11071 million in the next year. To this, the company had decided to spend money on research and development amounting to $500 million so that they get access to better as well as effective ecosystem after the disastrous incident Deepwater Horizon Oil Spill. British Petroleum had decided to contribute $360 million cost of Six berms in Louisiana Island project so that they can earn their goodwill over the past years. The amount that was spent by the company on developing Ecosystem was treated as revenue expenses and charged from the profit and loss account. As mentioned in the IFRS norms, it was noted that the investment made from the ecosystem should be treated as capital expenditure but British Petroleum had treated it as expenses and shown in the profit and loss account. This accounting treatment helped in understanding the fact that British Pe troleum was not following the proper accounting as well as financial regulatory system. In addition, the company had brought into action some good plans as well as strategies where they can reduce the negative impacts that took place in Gulf of Mexico (Cherry et al., 2015). It is needed to open all the money that was put in the escrow account where the government should be able to use it and make the payment of all the legal charges even if they are proved or not. British Petroleum had even prepared consolidated financial statements as well as annual report in accordance with the norms and regulations present in IFRS and AASB standards. In that financial report, the company had clearly mentioned the amount of loss that they had to bear because of Deepwater Horizon Oil Spill in accordance with the domestic as well as international regulatory system. The damage was around 12 to 47 billion USD that harmed the overall ecosystem because of Deepwater Horizon Oil Spill. The main objective of this report is to relate the level of transparency on the working system of the company. Business enterprise failed to disclose the actual amount to their domestic as well as international stakeholders. To this, British Petroleum had not followed any of the frameworks, be it domestic or international by any chance. Business organization need to abide by the IFRS as well as AASB accounting norms if they want to maintain their goodwill at the time of reporting or preparing consolidated financial statements with regulatory authorities (Barrage, Chyn Hastings, 2014). Reflection on the Case of British Petroleum In this given case study, it is noted that British Petroleum had to go through various penalties as well as charges due to the incident Deepwater Horizon Oil Spill. The company had treated these expenses as revenue and shown in the profit and loss account. It is clear mentioned in the IFRS as well as AASB 137 standards upon the condition on if a company had made huge expenses as well as investment that is higher than the capital expenditure, then it should be treated under the heading Capital expenditure. British Petroleum had charged all the incurred loss from the profit and loss where it depicts that they faced high amount of loss from their operations. It is then the company treated these transactions as revenue expenditure so that they can save over the taxes that are levied by the government. In addition, the company needs to make total disclosure of all the financial statements and present it to the stakeholders. The company failed to make account for proper disclosure to their stakeholders that mean the company is at default as well as is not abiding by the accounting and the regulatory system (Atlas et al., 2015). British Petroleum failed to disclose the total details on ecosystem services as well as other environmental system that can be used by the company for reducing the negative impact on the financial position in any business enterprise. The incident Deepwater Horizon Oil Spill had brought negative impact on the business enterprise. In the year 2009, total profit generated by British Petroleum amounts to $6947 million that had adversely reduced to loss of $11071 million in the next year. It reveals the fact that the company failed to abide by the norms as well as disclosure requirements. The company had faced loss from the incident. It is essential for the company to make the necessary changes in the reporting frameworks that can increase over the level of transparency issues in the given approach. It is also the company who desire in managing the necessary changes in the business conditions as well as brand image that should be investing their money in establishing a more efficient ecos ystem in the most appropriate way. Conclusion At the end of the study, it is concluded that British Petroleum ha neglected and was not abiding by the accounting as well as financial reporting system. To this, the current report on Deepwater Horizon Oil Spill reflects upon the management department that brings the monetary significance on the company responses to the incident. The company had disclosed other failures as well that had been presented in the financial reporting. In that case, stakeholders are not satisfied with the information where the company failed to disclose the financial information in their annual report. The company had even made changes in their expenses and treated as revenue expenses. British Petroleum had suffered a huge loss and shows negative functioning of business enterprise. In order to recreate its brand image, it is the company who need to make the payment of all the charges as well as implement an effective ecosystem. It is essential for the accountant as well as financial managers to abide by th e IFRS norms and accounting standards at the time of preparing financial statement of the company. It is necessary for the government to make the alterations that is mandate requirement that takes into consideration ecological as well as sociological services that can be effectively used by the companies. This action will help in increasing the health safety requirements as well as increasing the level of transparency so that they disclose the financial and accounting details to the concerned stakeholders. Therefore, it is understood that the company need to create strong brand value in the gulf countries where they have to given high level of investment for implementing efficient ecosystem. Reference List Atlas, R.M., Stoeckel, D.M., Faith, S.A., Minard-Smith, A., Thorn, J.R. Benotti, M.J., (2015). Oil biodegradation and oil-degrading microbial populations in marsh sediments impacted by oil from the deepwater horizon well blowout.Environmental science technology,49(14), pp.8356-8366. Barrage, L., Chyn, E. Hastings, J., (2014). Advertising, reputation, and environmental stewardship: Evidence from the BP oil spill.Ann Arbor,1001, pp.48109-1220. Cherry, K.E., Lyon, B.A., Marks, L.D., Nezat, P.F., Adamek, R., Walsh, S.D., Fitzgerald, K.B., Anbinder, D.R. Bernacchio, C.V., (2015). After the BP deepwater horizon oil spill: Financial and health concerns among coastal residents and commercial fishers.Current Psychology,34(3), pp.576-586. Michel, J., Owens, E. 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