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Social and Enviromental Accounting

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Social and Environmental Accounting 1. Introduction Accounting forms the most important quantitative system within an enterprise. Information is offered to users in the form of financial reports, which are the final product of the accounting process. The purpose of financial reporting is to communicate financial information to interested parties. It is therefore important that financial reports must be presented in such a way that the relevant information is timeously communicated in a meaningful, comprehensible and useful manner, allowing users to act upon it and to use it to aid effective decision-making. However, environmental reporting embraces a number of quite different concepts and practices, for which different professional disciplines are appropriate. A company may be reporting principally the impact that the business has on the environment; or the impact the environment has on the business. Environmental accounting here is chiefly concerned with the latter (Anon, no date). This paper will focus on the discussion of whether the social and environmental reporting fulfils the objective of accounting. Moreover, it will give an account of how qualitative characteristics are relevant to such reporting. 2. Social and Environmental Accounting When the whole world experiences a rapid growth of industry and economic, unfortunately, the natural environment is terribly damaged at the same time. ...read more.


"The lack of reliable and accepted means of quantifying environmental costs for a company is on longer an excuse for their omission", Price Waterhouse USA 1992. The uncertainties may well require the application of techniques such as sensitivity analysis, simulation etc. Academics and environmentalists are often opposed to the quantification of environmental impacts as they regard the uncertainty and subjectiveness of the measurement process leave the figures with a level of credibility that they do not merit ( McChlery, 2000) 3. The Qualitative Characteristics of Financial Information On the same basis as all accounting systems, environmental accounting presents an objective picture of the present situation and changes in the natural heritage, interactions between the economy and the environment, expenditure on preventive measures, environmental protection and the repair of environmental damage. "Environmental accounting aims at achieving sustainable development, maintaining a favorable relationship with the community, and pursuing effective and efficient environmental conservation activities."(Caves, 1992, p.34) These accounting procedures allow a company or an organization to identify the cost of environmental conservation generated during the normal process of business; identify the benefit gained from such activities. Environmental accounting is aimed to identify, measure and disclose the activities of a company or an organization based on its environmental conservation cost or economic benefit associated from environmental conservation activities and the company's financial performance. ...read more.


For others, the traditional approach is preferred: 'Prudence [as defined by SSAP2] is a mainstay of traditional practice. The Prudence concept creates an essential bias . . . a potent antidote to counteract preparers' eternal optimism.' (Davies and Davies, 1999) 4. Conclusion To achieve sustainable development, there is an increasing pressure from a wide range group of stakeholders including government regulators, media, consumers, investors, employees, competitors and local communities to require the organizations to disclose their performance against environment, society and economy. To meet the need of the stakeholders, social and environmental accounting, a new approach to corporate reporting, has been emerged. However, there is a great challenge for organizations to use it in a regulated and standardized way due to a lot of practical issues. Reference * Anon, 1999. Survey of Environmental reporting. Pension and Investment Research * Anon, no date. What is an environmental report? Bournemouth: Bournemouth University. * Brian A., no date. An introduction to modern financial reporting theory. * Caves, R.E., 1992. Industrial Efficiency in Six Nations. UK: MIT Press * Davies and Davies,1996: 89. * McChlery S., 2000. Accounting for the environment. Leaa article. June 2000 * Price Waterhouse USA: Environmental Costs: Accounting and Disclosure, Price Waterhouse Desktop resources, 1992. * Stikich, R. (1997), Run your own business, Accountancy and Business Journal, Vol. 23, No. 33. UK: Bournemouth University. ...read more.

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