Importance Of Environmental Accounting

1595 Words7 Pages
Environmental accounting is a vital component of Social and Environmental Accounting and is believed to be accountants’ specific contribution towards preserving the integrity of the environment. Environmental accounting can be taken as covering all areas of accounting that may be affected by the business response to environmental issues. Environmental accounting involves the establishment of environmental management systems within organisations so that environmental issues can be addressed within the conventional practice. Further, these internal accounting systems need to be transformed into the reporting of environmental information, primarily in the corporate annual reports. This will make the firm accountable for its environmental
…show more content…
Cost accounting systems would need to trace environmental costs in addition to the conventional costs and attempt to internalise it. There would be a degree of subjectivity associated with this process but this need not be an insuperable problem: conventional practice has in the past managed to handle successfully a number of other subjective issues in accounting. The financial management components of accounting systems, on the other hand, would need, as part of their appraisal of investment projects, to consider the environmental impact of business operations. The risk assessment procedures within an organisation should be able to detect, estimate and minimise environmental risks. For instance, environmental audits could be undertaken to determine the environmental impact of the operations of a company. There may also be a need to create provisions for environmental risk and contingent liabilities, in order to forecast the adverse consequences of the business activities of the organisation. Auditors could, through their risk assessment models, play an instrumental role in detecting environmental violations. Environmental management systems could be established within conventional accounting information systems to handle environmental matters. The skills of accountants in establishing information systems to…show more content…
Whereas the former measurement model uses the initial book value of the assets as an upper ceiling for their maximum book value, the latter ensures the reflection of the fair value of the allowances, even if their current value exceeds their historical value. The two approaches to subsequent measurement are possible irrespective of whether the allowances were initially recognised at nil or at fair value.
The role of accountants
The extent to which accountants are involved in the FSC’s environmental management strategies provides empirical support for the claim that there is in general only limited involvement of accountants in environmental management at present. The literature on environmental accounting suggests that accountants in general are largely unaware of their potential for making a contribution to promoting environmental sensitivity in organisations (see for example Gray et al.
1995). There is a tendency to rely too heavily on the conventional accounting framework and to disregard social and environmental issues of significance to the organisation. The FSC’s environmental accounting practice is certainly reflective of such observations.

An examination of the FSC’s environmental management systems suggests
Open Document