Proceedings of Eurasia Business Research Conference
4 - 6 June 2015, Nippon Hotel, Istanbul, Turkey
ISBN: 978-1-922069-77-1
Green Accounting and Classification of Related Expenses
Arefeh Mohaghegh*and Amir Bolandpour **
Accounting information system as an important component of management
information system can have an effective role in protecting the environment against
manufacture pollutants companies. Environmental companies consists of set of
rules that improves the potentials of accounting system in recognition, record and
reporting the resulting effects of destruction and environment pollution.This branch
of accounting provides an alerting system for environmental events and the
purpose of utilizing it is participating of relating expenses in available accounting
system. Management and desired evaluation of environmental expenses is an
important issue which business entities should pay attention to it and consider
these expenses in their decision making.In competitive market, gaining desired
profit in the market depends on whether business entity is able to manage the
environment expenses appropriately or not? Distinguishing the environmental
expenses from other expenses is not easy to take place. Some of the environment
expenses are hidden in expenses or even this is possible not to enter in the entities
accounting systems. These expenses are usually defined as contingent expenses,
liabilities or intangibles.Legal requirements and individual also beneficiary groups
need to environmental information causes some difficulties on entities. This
information can disclose in financial statements in a qualitative or quantitative
manner. Appropriate disclosure of this information increases the reliability and
causes positive attitudes of capital market and investors on these reports,
enhancement of revenues and market value. However, it is expected that
environment accounting would have more effect on companies .
Key words: Environment Accounting, Environmental Expenses, hidden expenses,
Contingent Expenses.
Introduction
Today, human societies are growing and developing; factories and profitable units in
interaction with other components are growing as part of these communities and enter
new items into the global arena. Therefore, administrating of every unit requires the
use of human, financial and natural resources. The role and use of these three factors
in production and continuity of economic activities includes accounting, too. As we
know, accounting defines financially the process of interpreting events with financial
impact on economy units. In such way, the concepts of human resource accounting,
social and bioenvironmental accounting is defined. Human resource accounting is the
application of accounting methods within the framework of human resources
management and basically is a system dictates the management of the organization
what changes in human resources occurred. Social accounting is also a part of the
knowledge of accounting which aims to measure and report the social effects resulting
from business activities. Any business unit is part of a community in which works and
constantly interacts with other community members.
___________________________
Arefeh Mohaghegh, Department of Accounting, Semnan Branch, Islamic Azad University, Semnan,
Iran, Email: Mohaghegh.arefeh@yahoo.com
Amir Bolandpour, Head of Financial Department in Khorasan Province, Mahan Airline. Iran,
Email: Amir0661@yahoo.com
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Proceedings of Eurasia Business Research Conference
4 - 6 June 2015, Nippon Hotel, Istanbul, Turkey
ISBN: 978-1-922069-77-1
Having regard to the unwritten social contracts among community members that have
been enacted to protect the interests of all members, it is required that the business
units being aware of their obligations and responsibilities and don’t make it limited to
only the shareholders interests, but also towards other social groups such as
creditors, employees, customers and vendors and also the environment. During 19811990, the accounting literature inclined from social responsibility accounting into the
bioenvironmental one and tried to understand what kind of environmental information
would be necessary and suitable to be disclosed in financial invoices of the
companies. Current article aims to categorize environmental-related costs imposed
upon companies and present a general overview of them.
History and Literature
1. Environmental Accounting History
Since mid-70s, industrial companies faced with the concept of the reporting of
bioenvironmental debts. Mentioned companies at first were reluctant to mention the
bioenvironmental damages in their financial invoices. But over time, and the increased
rate of the losses, they were forced to respect these problems.
In 1975, the board of compiling accounting standards published his No.5 quarterly by
the title of “probable event accounting” to help identify this condition in which the
potential environmental damage must be reported in financial invoices. (In case of the
probability of its occurrence and when the amount of loss can be estimated). A debt of
compensating environmental damages is considered the probable loss. But due to
future difficulties in estimating the rate of losses, different approaches adopted by
companies and industries to estimate the loss. However, no company properly
followed the defined instructions. So, the need to correct and develop a new
instruction was felt.
In 1976, Interpretation No. 14 by the title of “estimating the amount of a loss”
published by compiling board of accounting standards; but no comment on the delay
of registering the bioenvironmental costs mentioned.
2. The Concept of Environmental Accounting
Environmental accounting is a set of accounting rules With a view to improve the
system for identification and data collection and calculation of environmental costs in
prices of all goods and services works, System to record and report the impacts of
environmental damage, and deals. Environmental Accounting for the environment is
considered as an investment and costs associated with maintaining a cost acceptable
and acceptable in the production process and consider the economic and
computational. The concept of environmental accounting at the micro and macro
dimensions studied and every one of them is used.At the microeconomic level or
business unit, accounting environment can in financial accounting and management
accounting to be used. Business unit through which financial accounting information,
accounting, business to users outside the organization, report says. Requirements for
disclosure of environmental liabilities and costs are required. Environmental
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Proceedings of Eurasia Business Research Conference
4 - 6 June 2015, Nippon Hotel, Istanbul, Turkey
ISBN: 978-1-922069-77-1
accounting is used for management accounting. The business units based on the
rules governing can Cost of materials used and the environmental costs For its
operations to measure And how environmental costs in the circulation of materials and
other physical aspects of agency operations identified or allocated An example of
application of accounting, financial accounting, business friendly environment is
created ; To the concept that improving environmental performance can lead directly
to improved business unit financial There is a direct link between environmental and
financial performance and business unit accounting employing strong environmental
practices are mandatory, At the macroeconomic level, the accounting environment for
the calculation of the cost of groundwater sources and flows of these resources are
used, Defined and presented for the calculation of national income for environmental
accounts such as GDP, a range of accounting used in the macroeconomic
environment is. Of the important points in connection with the accounting environment
may be misleading this is what causes some environmental goods have economic
value but are not traded in the market. The value of irrigation water used for drinking
or agricultural land, reflecting the cost of water transmission and distribution
infrastructure is Water, not its value. Another point is that the real value of natural
resources such as air, land, water and … used in the manufacture of various
products, the cost of manufacturing products and services are not properly reflect.
Environmental Costs
To achieve environmental objectives such as increasing revenue, reducing costs and
improving environmental performance in terms of environmental institutions, requires
identification of environmental costs, current, and future potential .A business unit of
the environmental costs to the business of providing information on environmental.
Moreover, these costs are not always separable from other costs; some costs are
partly environmental and partly as other ordinary. However, what is important is that
the cost to correct the report and the decision has affected users.
Classification of environmental cost
Environmental cost accounting system with a different perspective has been
classified.
What is certain environmental costs at different institutions, depending on the
company's activities can be further classified?
However, the overall group of hidden environmental costs of their expenses related to
the future and others are there is a possibility in the future.
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Proceedings of Eurasia Business Research Conference
4 - 6 June 2015, Nippon Hotel, Istanbul, Turkey
ISBN: 978-1-922069-77-1
Costs of
environmental
Future costs
(future)
Likely costs
Non- obvious
(hidden)
Display1: Classification of Environmental Cost
1) The Hidden Costs
The first of these costs, environmental costs are the primary before the operation,
system design and use of the facilities have been created .These costs include the
cost of location, design environmentally friendly products, select group of qualified
providers of goods and services, environmental assessment and pollution control
equipment is; Including these costs as overhead costs or research and development
costs, it is possible When managers and analysts who focus on the costs of
operations, system design or production requirements, these costs will be missed
Second, the cost of required and optional environment In the operations, systems or
facilities are required to tolerate .Although many companies treat these costs as
overhead costs but the managers and analysts responsible for daily operations and
business decisions, are considered less Because of these costs to overhead costs,
less the cost of the two groups were similar.
2) The Cost Of Future
This group of costs, the costs are defined that will happen in the future .In other words,
there is always the cost that they're confident in the future, Future costs is called.
The cost of such termination, the transfer of inventory, mapping and visit measures of
this kind of costs are.
3) The Likely Costs
Repair costs or damages resulting from the accidental release of environmental
contaminants Like oil, the environment, criminal violations of environmental
regulations and costs associated with unexpected consequences, are examples of
likely costs The costs of the debt or the cost of creating new Identification of potential
liabilities are In the circumstances, the inability to identify these costs has caused That
is not at the cost accounting system and management decisions about the future .
Time commitment for future environmental costs are And is subject to the debt .
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Proceedings of Eurasia Business Research Conference
4 - 6 June 2015, Nippon Hotel, Istanbul, Turkey
ISBN: 978-1-922069-77-1
It is almost certain that the debt must be provided to identify and estimate costs when
the debt costs of future events is possible.
Should be given to the likely event Accounting Standards Board standard events is
likely to be the probability of future events, they may Considers necessary. It only
speaks of the possible losses and gains And includes future costs that will be an
asset to the school In other categories of costs can be Required of them and the legal
requirements and classification And other voluntary groups and the thoroughness and
patience as the organizational unit Display 2 shows the species is classified The
overall costs associated with the environmental costs of mandatory and voluntary cost
sharing has The wage costs such as materials, supplies, facilities, buildings related to
the normal cost of production is. Separate the two categories of costs are shown.
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Proceedings of Eurasia Business Research Conference
4 - 6 June 2015, Nippon Hotel, Istanbul, Turkey
ISBN: 978-1-922069-77-1
health care
pollution
control
Costs of normal
protective
equipment
Environmental
Studies
Recycling
The Water
management
planning
labeling
mandatory
jees
Research and
Development
Waste
Management
Reporting
Optional
fees
study
Support
research
projects
Information
Healthy
retailers
Modeling
Evaluation and
monitoring
public
relations
Display. 2: shows the species is classified
the overall costs associated with the
environmental costs
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Manpower
training
Supervision
and
Examination
Proceedings of Eurasia Business Research Conference
4 - 6 June 2015, Nippon Hotel, Istanbul, Turkey
ISBN: 978-1-922069-77-1
It should not be forgotten that there are costs as well as the The costs of production
are considered normal or so-called direct And are used in industrial accounting and
budgeting. But the environmental are not costs. Costs such as water, electricity,
fuel.But remember that the optimal use of resources, the environmental benefits.
How to Deal with Environmental Costs
When an institution for certain environmental costs in the current period are likely to
be For each accounting period is the cost? Should be considered whether capital or
adjustment costs or prior period?Environmental costs in a given period may a result of
current or expected future cost of an asset or service is created.Environmental costs
that result in ongoing costs to be clearly identified in the will financial statements And
environmental costs that result in the expected future costs are likely. When the
financial statements will identify the criteria that the debt is identified.If the
environmental costs resulting from changes in estimates are dealt with. Environmental
costs that are directly or indirectly associated with the current period. Should be in the
current period costs. In addition, the environmental costs as period expenses or
losses are considered. In the current period should be eliminated. Many environmental
costs can be used to better business decisions, Investment in environmentally sound
technologies and processes to redesign products to reduce substantially the
appropriate, or they have completely eliminated; because some of these costs may
not create any added value to the system or product. Better management of
environmental costs will be able to improve corporate environmental performance and
benefits for the community to be worthy of scorn.
Summary and Conclusions
General concepts of environmental accounting at all levels of the organization, to help
the decision process Timely and accurate data base management decisions are
business units. Accounting practices, the environment, tools for uncovering the hidden
information, By different methods of accounting for the bulk of business decisions can
be Through the adoption of common principles governing the environment would
affect. Institutions generally evaluate the demand for the product and the price that the
market is willing to pay for the product, Prevailing market conditions are considered.
Sufficient to determine the profitability and cost justify the selling price of the product
should be compared with market prices. When manufacturers decide to determine the
type, value priced products to factors such as market conditions, customer retention
and long-term growth, according to industry. The main factors considered in
connection with the product, it's costing the correct. In the absence of environmental
costs can not be the optimal way to allocate. Cross-subsidies between products of the
kind will happen. This type of system and cost allocation can be Business unit in terms
of competitive disadvantage relative to other competitors. In general, the more
accurate cost allocation and cost management can, Better decisions regarding the
composition of their products adopted, and thus compete with other leading in the
institutions. Accounting concepts for the environment can also be used to develop
environmental management systems; among thesesystems,developing common
standards
is
ISO
14000
the policy response to the requirements of business units in order to be able to make
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Proceedings of Eurasia Business Research Conference
4 - 6 June 2015, Nippon Hotel, Istanbul, Turkey
ISBN: 978-1-922069-77-1
qualitative. As institutions, strengthen their self-organizing systems are structured,
Accounting for the environment, they will play an integral development and success,
This data is based on accounting systems to provide information for environmental
managers.In order to better understand the effects their decisions will be coordinated,
this information can be used strategically to stimulate improved environmental
performance. The full inclusion of environmental costs in business decisions and
strategic approach to the management of mutual commitment is required. In the long
term outlook, the competent institutions to the real environmental costs of their actions
are responsible and accountable. In dealing with the competitive challenges of the
future will be in a superior position. The accounting environment is an early warning
system for environmental disasters, one of the basic steps for dealing with pollution
and the destruction of the environment to identify and punish perpetrators of crimes
against the environment, development and environmental protection rules are set.
Seems to be a major group of rules can be induced by corporate environmental
accounting system.Available evidence suggests that this is true to a limited number of
business units to identify the environmental costs of their actions and decisions in an
effective way to have, without identifying the source of many business units or
operating costs of environmental. And this led to poor decision making on the one
hand and the environmental destruction caused by the company. Therefore it is
necessary to divide accounting information system environment is restored, to control
environmental decisions we make better use of information.
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