Environment Management Accounting Paper F5
Environmental Management Accounting
Environmental Issues * Global Warming * Air and water pollution * Waste Disposal and treatment
Examples- Bhopal (leakage of chemical gas), Exxon Valdez (spilling 10.8 million gallons of oil), Fukushima Nuclear Plant leakage in Japan (2011)
Issues for Business:
Businesses are becoming more and more conscious of the environmental implications of their operations, products and services. Environmental risks cannot be ignored.
Consequences of poor environmental behaviour
Punishment includes fines, more environmental taxes, loss in land value, destruction in brand values, loss of sales, consumer boycotts, inability to secure finance, loss of insurance cover, law suits and damage to corporate image.
Traditional Management Accounting
Many existing conventional accounting systems are unable to deal adequately with environmental costs and as a result simply attribute them to general overhead accounts. Consequently managers are unaware of these costs, have no information with which to manage them and have no incentive to reduce them.
Environmental Management Accounting-EMA
EMA is an attempt to integrate best management accounting thinking and practice with best environmental management thinking and practice. EMA is the generation and analysis of both financial and non-financial information in order to support internal environmental management processes.
Major areas for the application for EMA are: * In the assessment of annual environmental costs/expenditures * Product pricing * Budgeting * Investment appraisal * Setting quantifiable targets in performance measurements
Definition of Environmental costs
1. US Environmental Protection Agency argued that the definition of environment cost depends on how a company intends to use the information, for example in capital budgeting or product design. * Conventional costs are those raw material and energy costs having environmental
Environmental Issues * Global Warming * Air and water pollution * Waste Disposal and treatment
Examples- Bhopal (leakage of chemical gas), Exxon Valdez (spilling 10.8 million gallons of oil), Fukushima Nuclear Plant leakage in Japan (2011)
Issues for Business:
Businesses are becoming more and more conscious of the environmental implications of their operations, products and services. Environmental risks cannot be ignored.
Consequences of poor environmental behaviour
Punishment includes fines, more environmental taxes, loss in land value, destruction in brand values, loss of sales, consumer boycotts, inability to secure finance, loss of insurance cover, law suits and damage to corporate image.
Traditional Management Accounting
Many existing conventional accounting systems are unable to deal adequately with environmental costs and as a result simply attribute them to general overhead accounts. Consequently managers are unaware of these costs, have no information with which to manage them and have no incentive to reduce them.
Environmental Management Accounting-EMA
EMA is an attempt to integrate best management accounting thinking and practice with best environmental management thinking and practice. EMA is the generation and analysis of both financial and non-financial information in order to support internal environmental management processes.
Major areas for the application for EMA are: * In the assessment of annual environmental costs/expenditures * Product pricing * Budgeting * Investment appraisal * Setting quantifiable targets in performance measurements
Definition of Environmental costs
1. US Environmental Protection Agency argued that the definition of environment cost depends on how a company intends to use the information, for example in capital budgeting or product design. * Conventional costs are those raw material and energy costs having environmental