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The second of three types of ambiguity: actual ambiguity

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Actual ambiguity refers to ambiguity that occurs in the act of speaking.  It arises when a word or phrase, without variation either in itself or in the way the word is put forward, has different meanings.  The statement does not contain adequate information to resolve the ambiguity, resulting in a number of legitimate interpretations.  Two distinct types of ambiguity are categorised as actual ambiguity:  pragmatic and extraneous. 

Pragmatic Ambiguity

Pragmatic ambiguity arises when the statement is not specific, and the context does not provide the information needed to clarify the statement.  Information is missing, and must be inferred.  An example of pragmatic ambiguity is the story of King Croesus and the Oracle of Delphi (adapted from Copi and Cohen 1990):

"King Croesus consulted the Oracle of Delphi before warring with Cyrus of Persia.  The Oracle replied that, "If Croesus went to war with Cyrus, he would destroy a mighty kingdom".  Delighted, Croesus attacked Persia, and Croesus’ army and kingdom were crushed.  Croesus complained bitterly to the Oracle’s priests, who replied that the Oracle had been entirely right.  By going to war with Persia, Croesus had destroyed a mighty kingdom – his own."

Pragmatic ambiguity arises when the statement is not specific, and the context does not provide the information needed to clarify the statement (Walton 1996).  The information necessary to clearly understand the message is omitted.  Due to the need to infer the missing information, pragmatically ambiguous statements have multiple possible interpretations (Walton 1996).  Croesus interpreted the Oracle’s statement as indicating his success in battle – the response he desired.  As noted by Hamblin (1970), Croesus’ logical response to the oracular reply would have been to immediately ask the Oracle, "Which kingdom?"  Further information is needed to resolve pragmatic ambiguity. 

In the case of an information request, pragmatic ambiguity exists in the request for "A report of all the clients for a department."  The ambiguity is that the request does not refer to a specific department.  The end user could legitimately prepare a report for any department.  Further information is needed to resolve this actual ambiguity in this case.

Extraneous Ambiguity

In contrast to pragmatic ambiguity, in which information necessary to clearly understand the message is omitted, extraneous ambiguity arises from an excess of information.  Clearer communication arises where the minimally sufficient words needed to convey the message of the statement are used (Fowler and Aaron 1998).  Where more words are used than necessary, or where unnecessary detail is provided in the communication that is not part of the message, ambiguity arises.  The excess detail obscures the essential message and contributes to different emphases or interpretations.

The use of passive voice, vacuous words, or the repetition of phrases with the same meaning all contribute to lack of clarity (Fowler and Aaron 1998).  The use of clichés and the over-use of figures of speech add volume to the statement, but add little or no meaning.  Pretentious and indirect writing also adds to the bulk of the statement, but without adding meaning.  Fowler and Aaron (1998) provide the following comparative example:

  • Pretentious:    To perpetuate our endeavour of providing funds for our elderly citizens as we do at the present moment, we will face the exigency of enhanced contributions from all our citizens.
  • Revised:    We cannot continue to fund Social Security and Medicare for the elderly unless we raise taxes. 

The extra volume contributes to vagueness in the first statement, and adds to the multiplicity of legitimate interpretations of the statement.  The first statement exhibits extraneous ambiguity.  The second statement communicates forcefully and concisely. 

An example of extraneous ambiguity in an information request is "A report of all clients (and their names and addresses only) for the Tax and Business Services department.  Some of those clients are our biggest earners, you know".  The last sentence is extraneous, and contains detail that is redundant, uninformative, or misleading relative to the fundamental message.  In information theoretic terms, extraneous ambiguity is "noise" in the communication (Axley 1984; Eisenberg and Phillips 1991; Severin and Tankard 1997). 

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The first of three types of ambiguity: potential ambiguity

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Again, this is lifted from my thesis which looks unlikely to ever see the light of day unless I take it off the shelves in BEL library at UQ.

Potential ambiguity arises when a term or a sentence is ambiguous in and of itself, for example, before its use in the context of a sentence or paragraph.  Three types of ambiguity are categorised as potential ambiguity:  lexical, syntactical, and inflective. 

Lexical Ambiguity

Lexical ambiguity is the most commonly known form of ambiguity (Reilly 1991; Walton 1996).  It occurs when words have more than one meaning as commonly defined and understood.  Considerable potential ambiguity arises when a word with various meanings is used in a statement of information request.  For example, "bank" may variously mean the "bank" of a river (noun), to "bank" as related to aeroplane or a roller-coaster (verb), a savings "bank" (noun), to "bank" money (verb), or a "bank" of computer terminals (noun) (Turner 1987).  Lexical ambiguity is often reduced or mitigated by the context of the sentence. 

In the case of an information request, lexical ambiguity exists in the statement "A report of our clients for our marketing brochure mail-out".  The word "report" may have several meanings, independent of its context.  A gunshot report may echo across the hillside.  A student can report to the lecturer.  A heavy report can be dropped on the foot.  Although the context may make the meaning clear, the lexical ambiguity contributes to the overall ambiguity of the statement and increases cognitive effort. 

Syntactical Ambiguity

Syntactical ambiguity is a structural or grammatical ambiguity of a whole sentence that occurs in a sub-part of a sentence (Reilly 1991; Walton 1996).  Syntactical ambiguity is a grammatical construct, and results from the difficulty of applying universal grammatical laws to sentence structure.  An example of syntactical ambiguity is "Bob hit the man with the stick".  This phrasing is unclear as to whether a man was hit with a stick, or whether a man with a stick was struck by Bob.  The context can substantially reduce syntactical ambiguity.  For example, knowing that either Bob, or the man, but not both, had a stick resolves the syntactical ambiguity. 

Comparing the phrase "Bob hit the man with the stick" to the analogous "Bob hit the man with the scar" provides some insights.  As a scar is little suited to physical, violent use, the latter formulation clearly conveys that the man with the scar was struck by Bob (Kooij 1971).

In the case of an information request, syntactical ambiguity exists in the request "A report of poor-paying clients and client managers.  Determine their effect on our profitability for the last twelve months."  The request is syntactically ambiguous because the end user can interpret "their" to mean the poor paying clients, the client managers, or both.  Although the context may reduce or negate the ambiguity, syntactically the request is ambiguous.

Inflective Ambiguity

As Walton (1996) notes, inflective ambiguity is a composite ambiguity, containing elements of both lexical and syntactical ambiguity.  Like syntactical ambiguity, inflective ambiguity is grammatical in nature.  Inflection arises where a word is used more than once in a sentence or paragraph, but with different meanings each time (Walton 1996).  An example of inflective ambiguity is to use the word "scheme" with two different meanings in the fallacious argument, "Bob has devised a scheme to save costs by recycling paper.  Therefore, Bob is a schemer, and should not be trusted" (Ryle 1971; Walton 1996).  

In the case of an information request, inflective ambiguity exists in the example, "A report showing the product of our marketing campaign for our accounting software product".  Ambiguity derives from using the word "product" in two different senses in the one statement (Walton 1996; Fowler and Aaron 1998). 

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The nature of ambiguity

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The following is an excerpt from my thesis, written in 2000. 

Ambiguity is an inherent property of all natural languages, including English (Jespersen 1922; Williamson 1994). Absolute precision of a language is pragmatically undesirable, because the language is unable to adapt to new concepts (Williamson 1994). The communication needed to ensure effective and efficient report production, however, requires complete clarity. Hence, a tension exists between the natural language’s need for flexibility in the long term and the need for precision in the short term. Natural language is at once both dysfunctional and poorly adapted to the functions language needs to perform, yet flexible and broad-based such that it is useable in practice (Chomsky 1990).

Interest in linguistic ambiguity has an extensive history, and has been recognised as a separate branch of study since at least Aristotle’s time (Kooij 1971). Aristotle noted that language must be ambiguous, as a language has limited words but an infinite number of things and concepts to which those words must apply (Kooij 1971).

Russell (1923) recognised that all natural languages are vague and ambiguous. Excluding the realm of mathematical symbolism, constructing completely unambiguous expressions is not possible with the syntax and vocabulary tools available within natural languages (Williamson 1994). To endure and survive, language requires the flexibility to communicate new concepts. Ambiguity necessarily derives from the flexibility of natural language.

Kooij (1971) states that ambiguity arises where a sentence can be interpreted in more than one way. Similarly, Walton (1996) considers a sentence or statement to be more ambiguous as the number of legitimate interpretations of the sentence (or paragraph) increase. Ambiguity implies multiplicity of meaning (Walton 1996).

In classical analysis, the multiplex (Latin for “multiple meaning”) categorisation of Alexander of Aphrodisius (Hamblin 1970) suggests a basis for the identification of categories of ambiguity. In classical literature, Alexander of Aphrodisius identified three categories of ambiguity: potential, actual, and imaginary. Walton (1996) adapts this classical multiplex categorisation to his identified types of ambiguity.

Walton (1996) identifies six classical types of ambiguity in natural language: lexical, syntactical, inflective, pragmatic, emphatic, and suggestive. In addition to Walton’s (1996) taxonomy, extraneous information and noise in the communication can also be a source of ambiguity. Extraneous ambiguity arises where the communication is not parsimonious, or the communication includes information that is not directly relevant to the message being communicated (Fowler and Aaron 1998). Extraneous ambiguity is an actual ambiguity within the Walton (1996) taxonomy.

Each ambiguity type can be independently present within the communication. Walton’s (1996) modified taxonomy and model of ambiguity is presented in Figure 1.

Figure 1
Types of Ambiguity (adapted from Walton 1996)

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An introduction to the Carbon Emissions Reporting regime in Australia

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This is a blog post from a CPA Australia Carbon Emissions Reporting Discussion Group meeting – the inaugural meeting – that I attended on 18th November 2008.  Danny Power from PwC is the convenor. 

There will be an election of office-bearers at the end of the next meeting.  The topics under discussion are going to be quite broad-ranging.  Danny is linking it to the sustainability reporting issues, and Danny seems to think the label might change later.  However, Carbon Emissions Reporting is the current label for the group – thinks we might need to break into several discussion groups at some point (I’m not sure about that – see how popular it is).  There were about 40 people in attendance at this first meeting, though, which is always a good sign. 

Why did Danny set up the discussion group?

  • Compliance issues
  • The accountant’s role as a business advisor and in managing the reporting systems
  • Impacts for all organisations whether direct or indirect
  • “The Science” – still seems controversial, and if you’re going to report on it you need a working knowledge of what the processes are and how it works. 
  • Possibly the most important – to create a support and peer group for each other.

Schemes, coverage, compliance and impacts

This section of the presentation was given by Mick Zeljko of the Climate Change Team of PricewaterhouseCoopers. 

The finance function of most companies will be generally involved it seems in managing the reporting process, which is a substantial – very substantial – part of the new CPRS. 
Emissions Schemes

Current programs:

  • Mandatory Renewable Energy Target (MRET)
  • NSW Greenhouse Gas Abatement Scheme (GGAS)
  • Qld Gas Electricity Scheme (GECS)
  • Greenhouse Challenge Plus
  • Energy Efficiency Opportunities

The scope of these current programs is fairly limited and tend to be industry-specific.  There is a general feeling that perhaps people have been a little bit lax about the current programs, and it’s been pretty relaxed with the result that there has not been a lot of accuracy in the numbers that are currently being reported.  Probably a lot of companies don’t really have a lot of confidence in their reporting schemes. 

New Schemes:

  • National Greenhouse and Energy Reporting System (NGERS)
  • Carbon Pollution Reduction Scheme (CPRS)

NGERS will cover a lot less companies than those that are affected by ETS.  Types of gasses – six Kyoto gasses – CO2 and Methane and so on.  All measured in terms of CO2 equivalency – for example, methane is 20 times stronger than CO2, so 1 tonne of emitted methane is 20 CO2 Tonne Equivalents.

The NGERS does get down to 200 terajoules and 50 kilotonnes in 2010.  ETS will require only 25KT in 2010 so it is a little disconnected from NGERS – you can probably expect that the two programs will come into alignment. 

The Emission Trading Scheme (ETS) is now officially called CPRS – Carbon Pollution Reduction Scheme.  The feeling is that it sounds better to be reducing carbon pollution than trading the rights to emit pollution.  The scheme generally caps Australia’s emissions, and then identifies industries subject to the cap.  These industries are then allocated permits and at the end of the year have to have permits to cover what they emitted or pay a substantive fine.  If you don’t have the permits, you have to go buy them from someone who does.  This is the essence of the ‘cap and trade’ system.  

Under the scheme:

  • Government allocates or auctions permits up to the cap annually.
  • Companies compete on the market to acquire required permits.
  • Permits can be traded at market prices between firms and third parties.
  • Scheme requires robust monitoring, reporting and assurance of data.
  • Transitional assistance measures are included
  • A number of elements are yet to be finalised
    • Including emissions target trajectories, penalties for non-compliance and complementary measures for non-covered sectors. 

A green paper was released in July.  Everyone affected is throwing a submission at the government.  The government is aiming to have draft legislation ready by the end of the year.  There remains a whole bunch of stuff that is yet to be finalised, particularly emissions trajectories.  We don’t know what the limits will be yet though – what the targets will be. 

Covered sectors:

  • Stationary energy
  • Industrial processes
  • Fugitive emissions (e.g. mining and landfill)
  • Waste
  • Transport
  • Reforestation (opt-in – gets you credits)
  • Agriculture may come in later, around 2015.

Liability generally relies upon the emitter.  Generally it is upstream supply liability.

Emissions covered include:  Scope 1 (i.e. direct for example emissions from a generator) emissions only.  Contrast with NGERS which includes Scope 2 (e.g. indirect such as a factory’s use of electricity) across all 6 Kyoto Greenhouses. 

Threshold

  • Direct emissions of 25,000 tonnes of CO2e (Carbon Equivalents). 

The affected businesses will need to be collecting up systems, processes and governance to get NGERS into place. 

I wonder what the definition of an entity (i.e. a ‘business’ will be in the covered industry?). 

The first NGERS reporting period has commenced, those these systems etc will need to be in place from the point of view of affected NGERS entities.  CPRS Green Paper submissions are now closed.  The draft legislation is due out in early September, and they seem to want to have the legislation in place by the end of the year.  The Government wants to set medium-term national trajectories soon, and are aiming for a 1 July 2010 start.  These trajectories will affect how many permits are available – they will not determine who is affected by CPRS. 
We in Australia will have two full reporting periods and  given thethen full trading will commence under CPRS.  Unless it doesn’t  current financial crisis. 

Under NGERS – compliance is about registering and reporting.  Penalties apply for corporations and CEOs.

Project Definition

There are a a whole lot of rules and legislation around wh`o effectively owns the emissions.  A big mining site will have a lot of issues just working out what are we reporting on.

Systems Implementation

  • Collect greenhouse and energy data
  • Calculate greenhouse and energy data – there is a measurement determination that tells you how you work out how much CO2 you emit.  There are proxy things in place. 
  • Got to have good storage of records for any audit down the track.

Maybe I have a large IT bent, but I can see that this is going to be a problem for anybody seeking to implement Greenhouse Gas Reporting Systems and implement it through the accounting information system.  Or even if they don’t. 

Clearly it will have an impact upon reporting processes, and who does it – and I suspect this job will often fall to the finance function. 

Reporting

  • Register with GEDO
  • Prepare and submit data using OSCAR.  (See Greenhouse Challenge Plus).
  • There will be a lot of internal reporting as well particularly for companies that are CPRS-liable. 

Governance

  • Need a whole lot of things covering all of this to make sure it keeps ticking along. 

Companies will have to be NGERS compliance at a minimum. 

Assurance – large emitters (>125KT CO2) will require third party assurance of the information prior to submission.  Beyond these core issues we don’t know much around how it is taxed and so on.  The draft legislation hasn’t come out yet.  There are thousands of submissions being put in place.

If you are liable there are serious financial implications and also some compliance costs.  Indirect impacts will result in price increases it seems – which will be the main issue for SME’s. 
Indirect impacts are going to be increasing on just about everyone.  Transport and logistics – may see a complete change in the competitive position between transport for example.  For instance you will need to reconsider where you get your services from e.g. road vs rail.

Need to do a risk assessment now.  Carbon due diligence.  Green paper submissions were a big thing a little while ago.

Strategic Response – can do a lot of stuff now.  There are opportunities for new services and products – carbon market planning and financial advice.

CPRS Accounting Issues:

  • Permits acquired to satisfy obligation = intangibles
  • Permits acquired for trading = inventory
  • Measurement choices available
  • Impact of CPRS on impairment calculations
  • Accounting disclosures which may be required.
  • How to account for forward purchase agreements of carbon pollution permits
  • Broadly – what impact will the acquisition, trading, hedging and surrender of carbon plollution permits on reporting.
  • Tax treatment?  Still yet to be decided. 

We also noted in the presentation that cashflow issues exist potentially for people that have to buy permits up front. 

There will be another meeting in February, probably, of the Discussion Group.  It was a very interesting discussion and it will be interesting to see where these compliance issues around the Carbon Emission Emissions Reporting processes take us.  And as we can see above – there are assurance implications (although supposedly only for >125KT emitters?).

More notices as events warrant.

Accounting for the Emission Trading Scheme

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As part of the good old PhD, I’m looking at some of the impacts of reporting changes around the adoption of IFRS in Australia upon audits.  As part of this, I’m taking a look at accounting for the Emissions Trading Scheme – mostly because it’s interesting and topical.

The Australian Government has flagged an intention to create an emissions trading scheme, but has rather less-than-helpfully (in some ways) left the creation of accounting for its business impact to the International Accounting Standards Board.  According to the IASB work program, an exposure draft regarding accounting for emissions trading scheme will be provided in the second half of 2009, and IFRS standards will be released in 2010.  Alternative accounting models are to be brought to IASB in Q3 2008 (presumably, about now).

Rather less than conveniently, if IASB’s work program doesn’t slip, the new accounting standards will be released about the time the emissions trading scheme is implemented.  Hmmm.

The project overview is provided here for IASB: emissions trading scheme.

However, the above seems to relate to how to account for the dollar impact of the scheme (presumably, accounting for assets and expenses created by the scheme etc).  There is in addition a current reporting obligation under the National Greenhouse and Energy Reporting Act 2007.  This is of course NOT the ETS, but it does give us some things to do right now.  A copy of the guidelines for reporting obligations can be found on the government’s website.

By 2010, organisations that produce more than 50 kilotonnes of CO2 and/or use 200 terajoules of energy are subject to these requirements.  There is an enormous scope of the non-accounting information that is required just in order to determine whether or not the corporation exceeds the threshold (see also this link:  https://www.oscar.gov.au/Deh.Oscar.Extension.Web/Content/NgerThresholdCalculator/Default.aspx).

These reporting requirements appear to apply to at least government agencies, although it is uncertain whether State Departments (e.g. Queensland Health) are captured by these requirements.  The advice for government agencies is that they should set up their systems to make this apply, and likely it will be made apply in any event due to the need for them to maintain a reputation.

A lot to absorb.  By the way this blog is starting to creak under its own weight and desperately needs a redesign – I will redesign the categories and so on when I get a chance (so perhaps this is permanent).