environmental accounting design - Covenant University Repository

purposes of inventory valuation, profitability analysis, and pricing decisions.
U.S EPA (1995b:31)
Full Cost Environmental Accounting embodies the same concept as Full Cost Accounting
and highlights the environmental elements.
Total Cost Accounting is often used synonym for full cost environmental accounting
Total Cost Assessment (TCA) represents the process of integrating environmental costs into
capital budgeting analysis. ‘It has been defined as the long-term, comprehensive financial
analysis of the full range of private costs and savings of an investment’.
Skillius and Wennberg (1998) rather expatiated more on Full Cost Accounting (FCA), Total
Cost Assessment (TCA) and Life Cycle Costing (LCC) as defined in GEMI (1994) as three
techniques by which environmental dimensions are incorporated into accounting and the
financial system.
Total Cost Assessment is used to assess pollution prevention projects using
environmental cost data, appropriate time horizons and standard financial indicators. TCA
utilizes FCA techniques to properly assign environmental costs and savings to all competing
projects, products or processes as part of capital budgeting. Under TCA, decision makers will
use traditional financial measures in determining the feasibility of an investment project, such
as Net Present Value, Internal Rate of Return, Profitability Index, and Payback Period. Skillius
and Wennberg (1998:3) describe this as a technique to identify, quantify and allocate the direct
and indirect environmental costs of on-going company operations as follows Direct costs (e.g.
capital, raw materials); Hidden costs (e.g. monitoring, compliance reporting); Contingent
liability costs (remedial liabilities); and Less tangible costs (e.g. public relations, goodwill).
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