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 Punjabi University
Faculty of Business Studies
Department of Commerce
Seminar on Modern Accounting
Topic: Environment Accounting

Instructor: Prof.Harpreet kaur

Presented by: Tadesse Demeke

Roll No.1605220

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 ENVIRONMENTAL ACCOUNTING AS AN EXPRESSION OF
IMPLEMENTATION OF CORPORATE SOCIAL
RESPONSIBILITY

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Lessons objective:
At the end of this lesson learners are expected to:

1. Definition of Environmental Accounting

2. Functions and Roles of Environmental Accounting
3. Basic Dimensions of Environmental Accounting
4. Structural Elements of Environmental Accounting.
5. Environmental Conservation Cost Categories

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 1. Definition Environmental Accounting

Environmental accounting is a management tool that integrates the

financial implications of environmental issues in the financial
management systems of organizations. This enhances more
effective decision-making in order to promote environmental and
economic sustainability

Environmental accounting is a fairly new interdisciplinary

approach that integrates environmental and accounting issues.

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 Contd
This includes aspects such as what should be considered environmental costs,
and how to bridge the gap between physical information (environmental) and
financial information (accounting).

The language barrier between accountants and environmentalists will have to

be narrowed

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 2. Functions and Roles of Environmental Accounting
The functions of environmental accounting are divided into:
a. Internal functions and
b. External functions
a. Internal functions
. They assess the cost incurred by environmental conservation
activities and the related benefits, and provides for internal users.
.By using environmental accounting as an environmental
information system, it plays the role of a tool to be employed by:

Management
Related departments, Employees 7
 b. External functions

By disclosing the quantitatively measured results of its

environmental conservation activities, external functions allow a
company to influence the decision-making of stakeholders, such as

Consumers, business partners,

investors, financial institutions,
local residents, NGOs,
government, citizen
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3. Basic Dimensions of Environmental Accounting
a. Relevance
Materiality and Significance: In environmental accounting, materiality is
placed on the aspects of quantity and significance is placed on the
aspects of quality. From the standpoint of the materiality,
consideration is given to the quantitative impact of data that is
expressed in monetary value or physical units. The significance
focuses on the quality of information from the standpoint of
environmental conservation or the future impact that it carries.
b. Reliability
Environmental accounting should eliminate seriously inaccurate or biased data and
aid in building the trust and reliability of stakeholders.
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Cont...
c. Understandable
To ensure that the disclosed information is easy to understand for stakeholders,
wording should be made a simple as possible. No matter how complex the
content might be, it is necessary to disclose all essential information.
d. Comparability
Environmental accounting makes it possible for a company to make year-on-year comparisons.
Information provided should be comparable with different companies in the same sector
e. Verifiability
Environmental accounting data should be verifiable from an objective standpoint. Verifiable
information is data for which the same results can be obtained when using premises,
standards, and methods identical to those used by the party which created the data.

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 4. Structural Elements of Environmental Accounting.

A. Environmental Conservation Cost

i. Investments and
ii. Expense
i. Investments
.Investment amounts are expenditures allocated during a target
period for the purpose of environmental conservation. The benefits
from these investments are seen over several periods and are
recorded as expense during the depreciation period (the amount of
depreciable assets recorded during the period under financial
accounting standards).
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 ii. Expense
Expense amounts refer to the expense or losses resulting from the
consumption of goods or services for the purpose of environmental
conservation.

B.Environmental Conservation Benefit

Benefits obtained from the prevention, reduction, and/or avoidance
of environmental impact, removal of such impact, restoration
following the occurrence of a disaster, and other activities are
measured in physical units.

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 C. Economic Benefit Associated with Environmental Conservation
Activities

Benefits to a companys profit as a result of carrying forward with

environmental conservation activities are measured in monetary
value.

When we summarized Structural Elements of Environmental

Accounting.

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 2. Environmental
Conservation Benefit
1. Environmental Conservation Cost
[Physical Units]
[Monetary Value] Benefits obtained from the
Investments and expenses related to the prevention,
reduction, and/or avoidance of environmental prevention, reduction, and/or
impact, removal of such impact, restoration avoidance of environmental
following the occurrence of a disaster, and other impact, removal of such impact,
activities. restoration following the
occurrence of a disaster, and
3.Economic Benefit other activities.
Associated with
Environmental
Conservation Activities
[Monetary Value]
Benefits to companys profits as a result of
carrying
forward with environmental conservation
activities. 14
 5. Environmental Conservation Cost Categories

1. Business Area Cost

.This cost is for activities to reduce environmental
impact which occurs within the business area due to
key business operations.
.divided into three categories,
i. pollution prevention cost,
ii. global environmental conservation cost and
iii. resource recycling cost

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i. Pollution prevention cost
Costs to prevent specific types of pollution include air, water,
ground, noise, etc.

ii. Global Environmental Conservation Cost

Costs are allocated for the prevention of global
warming
to prevent the ozone depletion and

other global environmental conservation efforts.

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 iii. Resource Circulation Cost

Resource circulation cost is the cost incurred for sustainable

resource recycling, Cost for the efficient utilization of resources
2. Administration Cost
These costs are defined as those costs spent for
administering environmental conservation activities
such as:
Cost for disclosing environmental information and
environmental advertising
Cost for monitoring environmental impacts
Cost for training employees on environmental issues 17
3. R&D Cost
The cost is spending for research and development activities
allocated to environmental conservation.
R&D cost to develop products that contribute to environmental
conservation
R&D cost to curtail environmental impact at the product
manufacturing stage
4. Social Activity Cost
These are costs which are related to environmental conservation
activities that a company may carry out as a part of its social
activities but not directly related to its business activities such as:
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 Contd
Cost for environmental improvement activities, including
nature conservation, planting of greenery, beautification and
landscape preservation,
Cost related to donation or financial support of environmental
groups
Cost associated with various social activities, such as the
financial support of a local communitys environmental
conservation activities and the disclosure of information to the
local community

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5. Environmental Remediation Cost
These contingent costs are allocated for recovery of the environmental
degradation due to business activities such as:

Cost to restore the natural environment back to its original state
Cost to cover degradation suits connected with environmental
conservation
Provisions or insurance fees to cover degradation to the
environment

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