Initial steps in accounting for energy cost

Initial steps in accounting for energy cost

C o d e s w ith in th e c h a r t o f a c c o u n t f o r e a c h s o u r c e o f fu e l. •

S e p a r a te p o s ti n g o f e n e r g y in v o ic e t o a c c o u n t f o r o il ( d if f e r e n t s o rts a s

a p p r o p i a te ) , p e tr o le o u m , d ie s e l, e le c tr ic ity , m a in s g a s , b o ttle d g a s , c o a l, te c . •

A c c o u n t in g f o r o n ly th e f in a n c ia l im p lic a tio n d o e s n o t p la c e th e o r g a n iz a tio n in a p o s itio n to f o r e c a s t c h a n g e s in fu e l c o s ts a n d a s s e s s t h e i r im p a c t. T h e

c o m p a n y s h o u ld r e a liz e t h a t e n e r g y c o s t w ill r is e s u b s ta n t ia ll y a n d c a n o n ly

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52 Green Accounting in Indonesia .

expect more in n o v a tiv e

d e v e lo p m e n t s in a c c o u n t in g f o r e n e r g y to r e d u c e e n v ir o n m e n ta l im p a c t, a t th e s a m e tim e le a d s to b e tt e r e c o - e f f ic ie n c y m a n n e r a d o p te d b y t h e c o m p a n y .

Accounting for Waste Management

e f f ic ie n c y c a n b e u s e d to m in im iz e th e w a s te in o r d e r to r e d u c e f in a n c ia l burden.

S e v e r a l r e a s o n s b e lo w w a s g u id e d b y D e p a r tm e n t o f T r a d e a n d In d u s tr y , U K , to s u p p o r t th e in itia te o f w a s te m in im iz a tio n ; Reduce :

lo n g - te r m e n v ir o n m e n t a l lia b ility a n d in s u r a n c e c o s ts ; •

th e r is k o f s p ill a n d a c c id e n t;

and

improve :

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The International Journal o f Accounting and Business Society 53

a n d c o m m u n ic a t in g in f o r m a tio n s y s te m t h a t c a p tu r e s p h y s ic a l q u a n titie s o f w a s te . ( 3 ) M o n it o r in g w a t e r q u a lity c o m i n g o f f s ite s a n d e x te n d e d to a ll f ro m o f

w a s te . F r o m th is , th e c o m p a n y d e v is e d a c o m p r e h e n s i v e w a s te a c c o u n tin g s y s te m w h ic h c h a r g e d a ll w a s te m a n a g e m e n t c o s t ( c o s t a r i s in g fro m

d is p o s a l, in s u r a n c e g a in in g c o n s e n ts , e m e r g e n c y p r o c e d u r e s , s p illa g e s ,

e tc .) b a c k to th e lin e m a n a g e m e n t. \ s th e s a m e m a tte r s in v o lv e in h a n d lin g f o r e n e r g y , to b r in g th e c o m p a n y to w a r d w a s te m in im iz a tio n n e e d s e v e r y lin e o f m a n a g e m e n t to c o lla b o r a te

t o g e t h e r a c h ie v in g e c o - e f f i c i e n c y a n d e n v ir o n m e n ta l s u s ta in a b ility

Some steps in accounting for waste

* S e p a r a te a il w a s te m a n a g e m e n t a n d d is p o s a l c o s t to id e n tif ia b le c o s t

h e a d in g s . *

E x p a n d th e o b v io u s to ta k e a c c o u n t o f o t h e r w a s te - r e la te d m a tte r s - e .g . s p illa g e s , e m e r g e n c y a n d c o n tin g e n c y f a c ilita te s , in s u r a n c e , e tc . *

T a k e a d v ic e fro m f a c ilitie s , w a s te o r e n v ir o n m e n ta l d i r e c to r a n d c h a r g e

b a c k th e c o s t to th e p r o c e s s c r e a tin g th e w a s te . *

D e v e l o p A B C th in k in g , I f n o t a s y s te m , to r e f in e a n d d e v e lo p th is process. *

I n tr o d u c e th e ite m s t o th e lin e s o f b u d g e t- c e n te r b u d g e ts . *

R e c o g n iz e d th e s tr a te g ic a n d in v e s tm e n t im p lic a tio n . *

E n s u r e t h a t a ll f o r e c a s t ta k e s p e c ia l notice o f th e r a p id ly c h a n g in g ‘te r m s

A d a p te d f ro m G r a y , e t a l ( 1 9 9 3 : 1 3 6 )

T h e a c c o u n t a n t ’s h a v e to f in d th e w a v to m e e t th e o b j e c t iv e s o f c o s t m in im iz a tio n a lo n g w ith r e d u c in g w a s te q u a n tity a n d m in i m i z in g w a s t e ’s

e f f e c ts . T h is n e e d s b o th q u a n tity a n d f in a n c ia l u n its to b e a c c o u n te d fo r.

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54 Green Accounting in Indonesia ...

Accounting for Environmental Liabilities

T h e t e r m s o f ‘e n v ir o n m e n ta l l ia b ilitie s ’ m e a n t h a t th e c o m p a n y h a s an o b lig a tio n to m a in ta in th e e n v ir o n m e n t fro m w a s te o f c o m p a n y ’s p r o d u c tio n

a c tiv itie s . S in c e c le a n - u p ( r e m e d ia tio n ) c o s t p u t h u g e f in a n c ia l d e m a n d s o n

c o m m e r c ia l b u s in e s s e s fro m s m a ll c o m p a n y to la r g e e n te r p r is e s , a c c o u n ta n ts

h a s r e s p o n s ib ility to e s tim a te th e e x te n t o f e n v ir o n m e n ta l lia b ilitie s .

A t th e o t h e r s id e , p r e s s u r e s f ro m s ta te la w s a n d r e g u la tio n s m a y r e s u lt in a n u m b e r o f f in a n c ia l r is k s th a t a c c o u n ta n ts m u s t c o n s id e r . O n e s u c h r is k is th e p o s s ib ility a c o m p a n y w ill b e r e q u ir e d to c o m m it s u b s ta n tia l f u n d s to c o m p ly w ith e n v ir o n m e n ta l la w s a n d r e g u la tio n s . F o r e x a m p le , a m a n u f a c tu r in g

f a c ility is r e q u ir e d to in s ta ll o r u p g r a d e d e v ic e s to r e m o v e p a r tic u la te m a tte r fro m s m o k e s t a c k e m is s io n s o r to r e m o v e c h e m ic a l o r h e a v y m e ta ls fro m

liq u id o r s o lid w a s te b e f o r e d is p o s a l. T h e r e s u ltin g , c a p ita l e x p e n d itu r e w ill in c r e a s e p r o d u c tio n c o s t, w h ic h c a n n o t b e fu lly p a s s e d o n to c u s to m e r a n d

w ill le a d to a d e c lin e in f u tu r e e a rn in g .

I g n o r in g s u c h o f e n v ir o n m e n ta l lia b ilitie s / o b lig a tio n c a n s ig n if ic a n tly

a f f e c t a c o m p a n y ’s f in a n c ia l p o s itio n a n d its lo n g -te rm f in a n c ia l h e a lth . T h a t ’s w h y th e y s h o u ld b e r e f le c te d in f in a n c ia l r e p o r t. C u r r e n t fin a n c ia l r e p o r tin g , h o w e v e r , is in a d e q u a te b e c a u s e th e e x te n t o f t h e s e lia b ilitie s h a s n o t b e e n a n tic ip a te d .

a. The advantages of environmental liabilities 9 information.

D i s c lo s u r e b y c o m p a n i e s o f th e ir e n v ir o n m e n ta l lia b ilitie s w o u ld

b e n e f i t a ll p a r tie s m a k in g b u s in e s s a n d e c o n o m ic d e c is io n s . A c c o r d in g to W illia m s a n d P h ilip s J r. ( 1 9 9 4 : 3 1 ), in th e ir a r tic le “ C le a n in g U p O u r A c t;

A c c o u n t in g f o r E n v ir o n m e n ta l L i a b ilitie s ” th e r e a re s o m e r e a s o n s th a t

h a v e b e e n c o n c lu d e d :

F i r s t , in v e s to r s w a n t a n d n e e d to p r o te c t th e m s e lv e s a g a in s t lia b ilitie s a n d u n e x p e c te d s u r p r i s e s - in c l u d in g p o te n tia l e n v ir o n m e n ta l lia b ilitie s . S e c o n d , b u s in e s s w o u ld p r o f it f ro m m o re c o m p l e te d i s c lo s u r e o f

e n v ir o n m e n ta l lia b ilitie s i f it le d to m o re p r o a c tiv e a p p r o a c h t h a t w o u ld p r o te c t th e m f ro m th e e s c a l a t i n g c o s ts o f d e la y in a d d r e s s in g c le a n - u p is s u e . I f c o r p o r a ti o n s w e r e r e q u ir e d to c o n s id e r s u c h lia b ilitie s , th e y c o u ld im p r o v e t h e i r p la n n in g a n d d e c is io n m a k in g r e g a r d in g t h e m e a s u r e m e n t o f

c o m p l ia n c e w ith c o m p a n y p o lic y a n d g o v e r n m e n ta l r e g u la tio n s .

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The International Journal o f Accounting and Business Society 55

b e n e f it from more

th a t damages

b. The Estimation of Environmental Liabilities

C l e a n u p c o s t f o r e x i s t i n g p o l lu t io n a r e h i g h l y v a r ia b le b e c a u s e e v e r y w a s t e p r e s e n t s d i f f e r e n t c h a l l e n g e s . P o t e n tia l e n v i r o n m e n t a l r is k s a re

d i f f i c u l t t o a s s e s s , a r e c o n t in g e n t , o r c a n n o t b e q u a n t if ie d . B u t F A S B ( F in a n c ia l A c c o u n t i n g S ta n d a r d B o a r d ) N o . 5 ,

Accounting fo r Contingencies, p r o v id e s a c c o u n t a n t w it h f r a m e w o r k f o r a s s e s s i n g t h e

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Green Accounting in Indonesia ...

T h e E m e r g in g I s s u e s T a s k F o r c e ( E T I F ) r e c e n t ly p r o v id e d g u i d a n c e t h r o u g h is s u e n o .9 0 - 8 , Capitalization o f Cost to Treat Environmental Contamination , r e a c h e s a c o n s e n s u s is th a t w h e n a c o m p a n y in c u r s c o s t s

“ to remove, contain,

existing or

efficiency of property owned by the company.

c o n d i t i o n w h e n c o n s t r u c t e d o r a c q u ir e d , i f la ter.

r e m e d ia t i o n lia b i li t ie s . T h e k e y f a c t o r s are: *

Insurance coverage

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The International Journal o f Accounting and Business Society 57

Vol. 15y No. 1, August 2007 © Centre fo r Indonesian Accounting and Management Research Postgraduate Program, Brawijaya University

58 Green Accounting in Indonesia .

T h e c a ll f o r g r e e n a c c o u n t in g a n d a u d it in g in I n d o n e s i a h a s c o m e t h r o u g h s u b s t a n t iv e ly in t o t h e a c c o u n t in g lite r a tu r e . A p a r t ic u la r c o n c e r n e m e r g e d w it h in

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Postgraduate Program, Brawijaya University

The International Journal o f Accounting and Business Society 59

Unava M e n in g k a t k a n P e n g e n d a li a n p e n c e m a r a n . U s a h a w a n , N o . 1 0. T h .X X V .

Ekonomi D a la m

O k t o b e r . p a g e . 17

F a h e y , L ia m a n d V .K . N a r a y a n a n . 1 9 8 6 . M a c r o e n v ir o n m e n t a l A n a l y s i s fo r

S t r a t e g i c M a n a g e m e n t . W e s t v i e w P u b lis h e r , p .2 8 - 2 9 . G o r e , A l. 1 9 9 2 . E arth in t h e B a l a n c e . H o u g h t o n M if f in C o m p a n y , B o s t o n , p .3 4 2 Gray,

Rob, Jan

E n v ir o n m e n t ( T h e G r e e n i n g o f A c c c o u n t a n c v . Part II). Paul Chapman

P u b li s h in g L td , L o n d o n , p. 13 G r a y , R o b , Ja n B e b i n g t o n , a n d D ia n e W a lt e r s . 1 9 9 3 .

Accounting for the

E n v ir o n m e n t ( T h e G r e e n i n g o f A c c o u n t a n c y . P art 11). P a u l C h a p m a n

P u b li s h in g L t d ., L o n d o n , p. 1 65

J e b a r u s , F e l ix . 1 9 9 6 .M e n c a r i B e n a n g M e r a h P e m b a n g g u n a n L in g k u n g a n d a n

B i s n i s . U s a h a w a n , N o . 1 0 , T h n .X X V , O k t o b e r p a g e . 68 .

L ic k is s , M . 1 9 9 1 . M e a s u r in g U p t h e E n v ir o n m e n t a l C h a l l e n g e . A c c o u n t a n c y ,

January p .6

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60 Green Accounting in Indonesia ...

R o g e r s , G w y n n e a n d K r is to f , J a n . 2 0 0 3 . R e d u c in g o p e r a t io n a l a n d p r o d u c t c o s ts th r o u g h

E n v ir o n m e n ta l Q u a lity M a n a g e m e n t. V o l: 12 Iss: 3 S p r in g p : 17 R o th , H a r o ld P .

e n v ir o n m e n ta l

a c c o u n tin g .

C M A a n d C a r l E . K e lle r J R . 1 9 9 7 . Q u a lity . P r o f its a n d th e

E n v ir o n m e n t: D iv e r s e G o a l o r C o m m o n O b j e c t i v e s . M a n a g e m e n t

A c c o u n t in g M a g a z in e , J u ly , p a g e 51 R o th , H a r o ld P . C M A a n d C a r l E .k e lle r , J r. 1 9 9 7 . Q u a lity . P r o f its , a n d th e

E n v ir o n m e n ta l: D iv e r s e G o a l o r C o m m o n O b j e c ti v e s ? . M a n a g e m e n t

A c c o u n t in g , J u ly . p .5 4 -5 5 . S a id i Z . 1 9 9 5 . S is te m E c o la b e llin g : T a n ta n g a n d a n P e lu a n g n v a B a g i I n d o n e s ia .

G a ja h M a d a U n iv e r s ity B u s in e s s R e v ie w , N 0 . 8 /IV/, p .83

S te in e r , G e o r g e A . a n d J o h n F .S te in e r . 1 9 9 4 . B u s in e s s . G o v e r n m e n t , a n d S o c ie ty : A M a n a g e r ia l P e r s p e c tiv e . M c .G r a w - H ill I n c ..S e v e n th E d itio n , p .4 2 7 S to n e , D o n . 1 9 9 5 . N o L o n g e r a t th e E n d o f P ip e , b u t s till a lo n g w a v fro m S u s ta in a b ility

T h e c o n f e d e r a t io n o f B r itis h I n d u s tr y . 1 9 8 9 . Narrowing the Gap : Environmetal Auditing Guideliness For Business _ ( L o n d o n : C B I ) I 9 9 0 W h ic h is

b a s e d u p o n th e I n te r n a tio n a l C h a m b e r o f C o m m e r c e E n v ir o n m e n ta l

A u d i t in g ( P a r i s : IC C ) W illia m s , G e o r g in a C P A a n d T h o m a s J. P h ilip s J r., C P A 1 9 9 4 . “ C l e a n in g U p O u r A c t: A c c o u n tin g f o r E n v ir o n m e n ta l L ia b ilitie s * ’, M a n a g e m e n t

A c c o u n t in g , F e b r u a r y , p .31 W illits , S te p h e n D . C P A a n d R o n G u in tin i, C P 1 M .

1 9 9 4 . H e lp in g Y o u r

C o m p a n y ‘G o G r e e n ’. M a n a g e m e n t A c c o u n tin g M a g a z in e , F e b r u a r y , p .4 3 Young,

e n v ir o n m e n t s a n d in te r n a tio n a l c a p ita l m o b ility . J o u r n a l o f A c c o u n tin g R e s e a r c h . V o l: 41 Iss: 3 J u n p: 5 53 Z u b e r , G e a r g e R . a n d C h a r le s G . B e rry . 1 9 9 5 . A s s e s s in g E n v ir o n m e n ta l R is k . J o u r n a l o f A c c o u n ta n c y , M a rc h , p .45 M iln e , M a r k u s J. A S o c ia l C r itiq u e o f C o r p o r a te R e p o r tin g :

A c c o u n t in g & B u s in e s s R e s e a rc h . V o l: 33 Iss: 1 p: 83

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