Financial Reporting and Ethics - The Institute of Chartered ...

FINANCIAL REPORTING AND ETHICS‘X’ plant will cost N117,405,000 in purchase and annual maintenance forthree (3) years, as against N160,065,000in respect of ‘Y’ plant. Since theexpenditure is less on ‘X’ plant, it is recommended for purchase in preferenceto ‘Y’ plant.TutorialReaders should note that the factor of 2.1064 used above to discount the costsincurred can be obtained by summing up the yearly figures of 0.8333, 0.6944and 0.5787.In life cycle costing technique, the experience is to sum up, before applyingthe discount factor, the various costs which include the following:(a)(b)(c)(d)Historical cost of the assets;Operating costs of materials, labour, fuel, lubricants, etc;Lost profits; andSalvage value. This is an item of cash inflow.12.5 ENVIRONMENT MANAGEMENT ACCOUNTING AND ENVIRONMENTALCOST ACCOUNTINGThis is a new dimension of accounting introduced to the issue of environmentmanagement. These have to do with the introduction of EnvironmentManagement Accounting and Environmental Cost Accounting which are brieflydiscussed as follows:(a)(b)Environmental Management AccountingAccording to Bartolomeo et al (2000), environmental managementaccounting is “the generation, analysis and use of financial and relatednon-financial information, to support management within a companyor business.” The production analysis and appropriate application ofcosting, financial and statistical data collected assist an organisationproactively in managing its environmental issues diligently.Environmental Cost AccountingLally (1998) advocates that costs should be accounted for by theirspecific causes. The technique directly allocates every environmentalcost to its immediate cause or source such as pollution and refuse dump.Environmental cost accounting is to eliminate or at least reduce thearbitrary allocation of environmental overhead, so that the true cost ofproducts or services may be ascertained.256