Page 51 - DCOM409_CONTEMPORARY_ACCOUNTING

Contemporary Accounting

Notes The following are the key methods used for environmental accounting:
1. Natural Resource Accounts: The natural resource accounts include data on stocks of natural
resources and changes in them caused by either natural processes or human use. Such
accounts typically cover agricultural land, fisheries, forests, minerals and petroleum, and
water. In some countries, the accounts also include monetary data on the value of such
resources. But attempts at valuation raise significant technical difficulties. It is fairly easy
to track the value of resource flows when the goods are sold in markets, as in the case of
timber and fish. Valuing changes in the stocks, however, is more difficult because they
could be the result either of a physical change in the resource or of a fluctuation in market
price.
2. Emissions accounting: The concept of emission accounting was developed by the Dutch.
The National Accounting Matrix including Environmental Accounts (NAMEA) structures
the accounts in a matrix, which identifies pollutant emissions by economic sector. Eurostat,
the statistical arm of the European Union, is helping EU members apply this approach as
part of its environmental accounting program. The physical data in the NAMEA system
are used to assess the impact of different growth strategies on environmental quality.
Data can also be separated by type of pollutant emission to understand the impact on
domestic, trans-border, or global environments.

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Caution If emissions are valued in monetary terms, these values can be used to determine
the economic cost of avoiding environmental degradation in the first place, as well as to
compare costs and benefits of environmental protection.
3. Disaggregation of conventional national accounts: Sometimes data in the conventional
accounts are taken apart to identify expenditures specifically related to the environment,
such as those incurred to prevent or mitigate harm, to buy and install protection equipment,
or to pay for charges and subsidies. Over time, revelation of these data makes it possible
to observe links between changes in environmental policy and costs of environmental
protection, as well as to track the evolution of the environmental protection industry.
4. Green GDP: Developing a gross domestic product that includes the environment is also a
matter of controversy. Most people actively involved in building environmental accounts
minimize its importance. Because environmental accounting methods are not standardized,
a green GDP can have a different meaning in each project that calculates it, so values are
not comparable across countries. Moreover, while a green GDP can draw attention to
policy problems it is not useful for figuring out how to resolve them. Nevertheless, most
accounting projects that include monetary values do calculate this indicator. Great interest
in it exists despite its limitations

Notes Forms of Environmental Accounting
1. Environmental Management Accounting (EMA): Management accounting with
particular focus on material and energy flow information and environmental cost
information. This type of accounting can be further classified in the following
subsystems:
Segment Environmental Accounting: This is an internal environmental
accounting tool to select an investment activity, or a project, related to
environmental conservation from among all processes of operations, and to
evaluate environmental effects for a certain period.
Contd...

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