Globalization of Environmental Accounting

Topics: Environmentalism, Sustainability, Environment Pages: 9 (2791 words) Published: January 19, 2011
Globalization of Environmental Accounting
Jingyi Wang (MAcc)
December 1st, 2010
Abstract
As environmental issues have received much concern, more and more companies realize the importance of environment-related financial issues, especially environmental accounting. Many countries like US and Japan have made significant progress in this field, while China is facing difficulty in the development of environmental accounting. The objective of this essay is to discuss the international trend of the application of environmental accounting and to give recommendations to China’s construction of an environmental accounting system. The essay first gives introduction of the definition and background of the environmental accounting. Then, based on a comparative analysis of the guidelines under US-GAAP and IFRS about environmental accounting’s development, system and information disclosure, the essay discusses the globalization trend of environmental accounting. And lastly, the paper emphasizes the necessity for Chinese companies to move ahead in this area and provides some advice for an environmental accounting application for Chinese companies. 

Key Words: Environmental accounting, US-GAAP, IFRS, Environmental accounting application 1. Introduction of Environmental Accounting
Traditionally, companies believe that environment protection activities will only increase cost. In fact, it can help companies to operate sustainably. Companies have found that the traditional methods of accounting--financial accounting, cost accounting and management accounting--are not giving them the flexibility needed for disclosure in the area of environmental protection costs. A new type of accounting has been developed: Environmental accounting. 2.1 Definition of Environmental Accounting

“Environmental accounting” is used for more than environmental benefits and costs. At micro level it means the entire domain of accounting for the environment including: financial accounting, reporting and auditing, and environmental management accounting.” (1) It is an accounting system for any costs and benefits that arise from changes to a firm's products or processes, where the change also involves environmental impacts. According to the United States Environment Protection Agency (US EPA): “An important function of environmental accounting is to bring environmental costs to the attention of corporate stakeholders who may be able and motivated to identify ways of reducing or avoiding those costs while at the same time improving environmental quality.” (1) US Environmental Protection Agency (EPA). “An Introduction to Environmental Accounting as a Business Management Tool: Key Concepts And Terms” 2.2 Background of Environmental Accounting’s Development Environmental problems led by rapid economic growth have become more and more prominent. Environmental pollution, ecological imbalance and a series of environmental problems have intensified companies’ environmental risks. Companies are increasingly aware of the need to correct their attitude to environmental protection, to reflect the true operational matters related to the environment in order to prevent and control environmental pollution. Researches about environmental accounting began in the 20th century after Floyd A. Beams first published the “Pollution Control through Social Cost Conversion" in 1971. Since then, Western countries began to build accounting theories and form some preliminary theoretical frameworks. In 1990, Rob Grany’s report on green accounting was a milestone in environmental accounting research which indicated that environmental accounting has become a central issue of global concern. 2.3 Benefits of Environmental Accounting

Environmental accounting aims at achieving sustainable development, maintaining a favorable relationship with the community, and pursuing effective and efficient environmental conservation activities. The environmental accounting...

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http://web.ifac.org/sustainability-framework/ip-impact-on-financial-statements
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