Title: Accounting and Environment. Accounting Treatment of Environmental Items.
Objective: This article aims to show the accounting treatment that the different environmental items can receive when they are included in traditional financial accounting, in order to support the continuous improvement of accounting information.
Many companies present environmental matters in their reports, but few are capable of accounting for the environmental events that definitely influence their financial statements.
The great challenge for our business sector is to fully integrate the issue of the environment into the decision-making process and business strategies. An accounting system that contemplates the environmental concept in its account classifier will obviously have information available regarding its environmental costs and income, which is essential for the long-term sustainability of the company, especially if it is related to companies. natural resources exploitation.
The purpose of this article is to show the accounting treatment that the different environmental items can receive when they are included in traditional financial accounting, in order to support the continuous improvement of accounting information.
Keywords: Environment, environmental accounting, environmental assets, environmental liabilities, environmental costs and expenses, environmental income.
ABSTRACT
Title: Accounting and Environment. Countable Treatment of Environmental Departures.
Objective: This article has as purpose to show the countable treatment that can receive the different environmental departures when these are included inside the traditional financial accounting, with the purpose of supporting the continuous improvement of the countable information.
Many companies present in their memoirs matters of environmental character, but they are few those that are able to count the environmental facts that definitively influence in their Financial States.
The great challenge of our managerial sector is to integrate the topic of the environment to the process of taking decisions and to the business strategies. A countable system that contemplates the environmental concept in its classifier of bills, obviously will have available information for its costs and environmental revenues, what is indispensable in the long term company development, especially if it is about companies related with the exploitation of natural resources.
This article has as purpose to carry out the Design of a Countable Procedure for the registration of environmental variables, as a support to the continuous improvement of the Environmental Accounting.
Words Key: Environment, environmental accounting, passive environmental, active environmental, costs and environmental expenses, environmental revenues.
INTRODUCTION
This article deals with the accounting treatment that the different environmental items can receive once environmental incidents and impacts are taken into account within traditional financial accounting, in order to strengthen the continuous improvement of the accounting information of our business sector. Its importance lies in the fact that it is explicitly exposed, a set of standard entries that allow a correct record of those operations or economic events that are carried out in our companies, but with the particularity that they are operations or economic events that include the direct or indirect interaction of the company with the Environment that surrounds it.
Despite the fact that companies have an interest in translating environmental data expressed in physical units into data that is expressed in monetary units, this is not always easy or, sometimes, possible, since most of the time the same do not have an accounting design that allows them to quantify the actions they carry out in terms of environmental protection, of those they carry out to comply with the corporate purpose for which they were created, in effect, good environmental management of a company does not It can only be measured in the economic or monetary terms of traditional financial accounting, but it must also be measured through the so-called Environmental Accounting.
As a result, it is also about summarizing the main concepts and definitions that can help companies and other users interested in the accounting information that they provide, to recognize which would be the main environmental items with which the company would operate, for its correct accounting and subsequent presentation in the Financial Statements at the end of each fiscal year.
This issue is of great interest to companies, since as business commitment to the environment grows, it becomes more necessary to have more accurate and objective accounting information, especially at the time when the environmental strategy of the company appears as an essential component when it comes to adding value to it.
Finally, it should be specified that this article does not intend to deal with aspects of environmental accounting at a macroeconomic level, it only tries to expose the accounting treatment of environmental items that are commonly used in those current operations that are carried out in our companies within of an accounting exercise, trying to present them in the most practical and affordable way possible, in a language understandable to managers and company officials and to the academic or university world.
I. DEFINITIONS OF ACCOUNTING AND THE ENVIRONMENT
To standardize points of reference, it is appropriate to define the main concepts and definitions that will be addressed as theoretical and practical support for this article.
Environment: it is the set of elements of the natural environment harmoniously integrated into a balanced system, including the atmosphere; the weather; the forests; the biodiversity of species, including the human species; the waters; rivers; seas and oceans; the soils; mineral and subsoil resources and nature in general.
Natural resources: these are production factors provided by nature in the form of raw materials, fossil fuels, forests and fisheries, clean waters, breathable air, among others. They can be classified as renewable and non-renewable natural resources, taking into account their chronological cycle, that is, the time it takes to replace a given quantity of that resource, when an equivalent quantity has been used for a given application.
- Renewables: these are the ones that can continue to exist, despite being used by economic activity, thanks to regeneration processes. Non-renewable: are those resources that require long time cycles for their recovery. The most important are provided by the geological sphere of the Earth in the form of raw materials, source of materials, fossil fuels and source of energy.
Environmental impacts: they are defined as any change in the environment, be it adverse or beneficial, that is the result, totally or partially, of the activities, production or provision of services of the companies.
Depletion: it is the process by which chemical substances, created by man, destroy non-renewable resources, including fossil energy resources, forest resources, water resources.
Environmental item: to be considered as an environmental item, it must have a high and direct participation in the impact on the environment from the activity carried out in an organization.
Environmental accounting : Environmental accounting can be defined as the generation, analysis and use of financial and non-financial information aimed at integrating the economic and environmental policies of the company and building a sustainable company.
Environmental actions: are those actions aimed at preventing, reducing or repairing environmental damage.
Prevention actions : are those actions carried out in the organization aimed at avoiding a negative effect on the environment.
Reduction actions: are those actions aimed at reducing or cleaning up the undesirable effect that the organization causes, for whatever reason, to the environment.
Repair actions: are those actions aimed at the repair, decontamination or restoration of the damage that the organization causes, for whatever reason, to the environment.
II. DEFINITIONS OF THE MAIN ENVIRONMENTAL ITEMS
Activities related to the environment will be identified through accounts and subaccounts set up for the real accounts of assets, liabilities and equity; An example of this can be:
- Environmental cash: they represent the monetary resources and securities deposited in the entity's savings banks to finance environmental actions. Environmental inventories: represent the value of the stock of material resources destined for the entity's consumption or its commercialization related to environmental actions. Tangible fixed assets environmental: represent physically tangible properties that have to be used in a relatively long period in environmental activities and that are not normally intended for sale.The identification of environmental costs and expenses will be done through cost center, accounts or expense items Environmental taxes are considered obligations contracted by mandates of the law for the use of natural resources or environmental effects.
Environmental Assets: will be all those assets and rights that the company possesses, and that it fundamentally uses to minimize the environmental impact and to protect and improve the environment, including the reduction, prevention or elimination of future pollution caused by operations Of the entity.
Environmental Fixed Assets : when the company makes cash outlays for the acquisition of new assets, in order to carry out any environmental action for security or for environmental reasons and that, although they do not provide future economic benefits, they are necessary to obtain the rest of assets.
The liabilities Environmental: are all debts and obligations those in which probably incur the company as a result of environmental activities undertaken or to be undertaken to manage the environmental impact of company operations as well as those arising from environmental commitments of the accounting subject.
Environmental Provisions : will be those accumulations of expenses, of an environmental nature, in the same year or from a previous one and that when the closing date of the accounting year is probable or certain but indeterminate in terms of the accuracy of their amount or the date on to be done.
Environmental Patrimonies: those sources of financing that the organization may have from them for carrying out environmental activities. Also:
- Donations received by third parties, those material or financial resources for carrying out environmental activities are recognized. Donations delivered, material or financial, for carrying out environmental activities, should be considered as an account that increases the assets of the organization. Environmental reserves are those amounts that are created from the profits obtained at the close of the economic period, to face possible environmental damage caused in the fulfillment of the entity's objectives.
Environmental Costs: are those environmental costs that can be objectively expressed in a fixed way in the product, merchandise or service provided, either in a tangible or intangible way, and therefore grow or decrease in proportion to the volume.
Environmental Expenses: All expenses related to environmental activity will be considered as expenses associated with resources that have a direct relationship and environmental implications. Its origin can be given in periodic expenses for environmental prevention or remediation, or expenses originated by the ordinary activities of decontamination and environmental restoration.
- Environmental expenses will be considered as Operating Expenses, the following are recognized as environmental expenses, among others:
- A payment for the purchase of services related to environmental protection or prevention Expenses for personnel associated and employed in research and development activities related to the environment Expenses on products that protect the environment, as well as expenses for environmental effects (loss for environmental damage) Payments made by fines or sanctions by personnel in charge of compliance with specialized legislation.
Environmental Revenues: are an increase in the entity's economic resources, directly related to the environmental management of its resources, whether they are monetary expression of environmental goods or services or the decrease in expenses motivated by the savings obtained from efficient environmental management.
Environmental income can be obtained through savings from efficient environmental management, reduction of insurance premiums, maintenance costs or reduction of environmental costs, motivated by better waste management that will allow savings and reuse of materials and waste, with lower storage costs, operational savings, due to lower consumption of raw materials, auxiliary materials such as paper, packaging, packaging or lower consumption of energy, water and fuel, or also due to savings obtained by improving the public image.
III. INFORMATION TO TAKE INTO ACCOUNT FOR THE PRESENTATION OF THE FINANCIAL STATEMENTS
- The accounting policies used for the presentation of financial statements must be taken into account, as established in IFRS No. 1 and NCIF No. 1 Presentation of Financial Statements. Information regarding the recognition of financial statements must be presented in the financial statements. environmental assets, liabilities, capital, investments, contingencies, expenses and income. The environmental information that is the subject of publication must be located in the different documents used by the traditional accounting model. The use of the data must be clearly and precisely shown. resources that are financed by the entity or by a third person, in carrying out environmental activities.
Information to be included in the Situation Statement .
- The accounts of assets, liabilities and capital of an environmental nature that arise during the accounting year must be reflected. Where necessary, sub-accounts may be established where the content of each item is shown, and in this way perceive the behavior of the Environmental variables within the company structure. The current values of the environmental reserves, provisions and subsidies available to the company at the time of issuing the financial statements will be presented.
Information to be included in the Income Statement.
- The expenses and income of an environmental nature that occur during the accounting year must be reflected.A series of subaccounts may be used where these expenses and income are shown, and in this way it will be possible to know to what extent the environmental variables influence the result In the group of expenses, the company must identify all the consumption of materials, labor costs, services, amortizations, etc., that are related to the environment.
IV. DESIGN OF ACCOUNTING PROCEDURE FOR REGISTRATION OF ENVIRONMENTAL VARIABLES
As a complement to the procedure for the accounting record of environmental variables, the following pro forma journal entries are prepared:
Environmental inventories.
They represent the amount of the stock of material resources that the entity uses for the company's consumption or its commercialization, but which are closely related to environmental actions.
| Bill | Subaccount | Accounts and Details | Partial | Should | To have |
| 189 | Inventory of merchendise | XXX | |||
| two | Environmental Inventory | XXX | |||
| 410 | Short-term Accounts Payable | XXX | |||
| For the purchase of goods intended to protect the environment. |
When this type of merchandise is consumed, a charge entry must be made to the corresponding expense account and it is recorded as follows:
| Bill | Subaccount | Accounts and Details | Partial | Should | To have |
| 829 | Environmental expenditure | XXX | |||
| 189 | Inventory of merchendise | XXX | |||
| two | Environmental Inventory | XXX | |||
| Record of merchandise inventory consumption for environmental protection. |
Environmental tangible fixed assets
They must be shown differently from the rest of the assets that the entity has, and within this item three subaccounts are defined that collect the necessary and fundamental information on its movement: subaccount 11 for Environmental Tangible Fixed Assets in Warehouse; subaccount 12 for the Environmental Tangible Fixed Assets in Operation and subaccount 13 for the Idle Environmental Tangible Fixed Assets, as well as an expense item to record depreciation, so that it can be differentiated from the depreciation of the rest of the tangible fixed assets with which account the company. The purchase of an environmental fixed asset is made as shown below.
| Bill | Subaccount | Accounts and Details | Partial | Should | To have |
| 240 | Tangible Fixed Assets | XXX | |||
| eleven | Environmental Tangible Fixed Asset in Warehouse | XXX | |||
| 421 | Accounts Payable Tangible Fixed Assets | XXX | |||
| Registration of the purchase of Environmental Fixed Assets. |
Passives
Environmental provisions are those accumulations of expenses of an environmental nature in the same year or from a previous one, this account will be accounted for as follows.
| Bill | Subaccount | Accounts and Details | Partial | Should | To have |
| 829 | Environmental expenditure | XXX | |||
| 495 | Environmental Damage Provision | XXX | |||
| Registration of the Provision for environmental damage. |
Capital.
Environmental Donations: material or financial resources received from third parties to carry out environmental activities. This account will be posted as it appears.
| Bill | Subaccount | Accounts and Details | Partial | Should | To have |
| 240 | Tangible Fixed Assets | XXX | |||
| 30 | Environmental Tangible Fixed Asset in Warehouse | XXX | |||
| 620 | Environmental Donations | XXX | |||
| Registration of the Donation received from an environmental asset. |
Note: in the case of donations of an environmental nature, it should be clarified that the same procedure is followed as in traditional accounting in terms of their transfer to the capital account at the close of the financial year in which the donation took place, because for the next accounting period the amount of this account becomes part of the capital amount of the company.
Environmental Reserves: are those amounts that are created from the profits obtained at the close of the economic period, to face possible environmental damages caused in the fulfillment of the company's objectives; this account will be accounted for as shown below.
| Bill | Subaccount | Accounts and Details | Partial | Should | To have |
| 630 | Period Earnings | XXX | |||
| 650 | Reserve for Environmental Contingencies | XXX | |||
| Registration of the Donation received from an environmental asset. |
Environmental expenses: all expenses related to environmental activity will be considered as environmental expenses; this account is accounted for as follows.
| Bill | Subaccount | Accounts and Details | Partial | Should | To have |
| 829 | Environmental expenditure | XXX | |||
| 00101 | Plant Expenditure | XXX | |||
| 491 | Provision for General Repair | XXX | |||
| 021 | Counterpart expense repair | XXX | |||
| Record of the Establishment of the cost for the repair of a polluting gas emission plant. |
The aforementioned aspects constitute an important methodological foundation for any company, where through the different moments of the procedure the type of environmental accounting information that the company needs can be inferred. Next, and to demonstrate the relevance of the procedure, it is explained how the information on the journal entries would be presented in the financial statements issued by the companies at the end of each fiscal year.
Statement of income
Closing December 31st. Year 2XXX
| Net sales | XXX | |
| Less: Cost of Sales | XX | |
| Gross Profit or Loss | XXX | |
| Less: Distribution and Sales Expenses | XX | |
| Net Profit or Loss on Sale | XXX | |
| Less: General Administration Expenses | XX | |
| Environmental Expenses | XX | XXX |
| Profit or Loss in Operations | XXX | |
| Less: Financial Expenses | XX | |
| Expenses for Loss and Missing Assets | XX | |
| Other expenses | XX | XXX |
| Plus: Financial Income | XX | |
| Income from Surplus Assets | XX | |
| Other income | XX | |
| Environmental Income | XX | XXX |
| Profit or Loss before Tax | XXX | |
| Less: Taxes on Profits | XX | |
| Profit or Loss for the Period | XXX |
As can be seen, this way of presenting the information contained in the Income Statement is fundamentally motivated by separating environmental costs from total production costs, even though it may be the case that in the end the result obtained is the same, but it is possible, therefore, to make a more correct delimitation of each type of cost, in order to really know the amount of costs and expenses associated with the production or provision of services of the company in question.
Balance sheet
Closing December 31 2XXX
| Assets | ||
| Current assets | XXX | |
| Cash on hand | XX | |
| Cash in Bank | XX | |
| Short Term Receivables | XX | |
| Short Term Accounts Receivable | XX | |
| Advance Payments to Suppliers | XX | |
| Inventories | XX | |
| Environmental Inventories | XX | |
| Long Term Active | XXX | |
| Long-Term Notes Receivable | XX | |
| Fixed assets | XXX | |
| Tangible Fixed Assets | XX | |
| Less: Depreciation of Tangible Fixed Assets | XX | |
| Environmental Tangible Fixed Assets | XX | |
| Less: Accumulated Depreciation AFT Environmental. | XX | |
| Intangible Fixed Assets | XX | |
| Other assets | XXX | |
| Missing Goods in Research | XX | |
| Accounts Receivable Various Current Operations | XX | |
| Total Assets | XXXX | |
| Passives | ||
| Current Liabilities | XXX | |
| Payroll Payable | XX | |
| Withholdings payable | XX | |
| Short Term Payable Effects | XX | |
| Short Term Accounts Payable | XX | |
| Obligations with the State Budget | XX | |
| Vacation Provision | XX | |
| Provision for Environmental Damage | XX | |
| Other Operating Provisions | XX | |
| Long term passives | XXX | |
| Long Term Payable Effects | XX | |
| Loans Received | XX | |
| Other passives | XXX | |
| Other accounts payable | XX | |
| Total Liabilities | XXXX | |
| Capital | ||
| State Investment | XX | |
| Environmental Donations | XX | |
| Development Reserves | XX | |
| Reserves for Environmental Actions | XX | |
| Profit for the Period (X) | XX | |
| Total Capital | XXXX | |
| Total Liabilities and Capital | XXXX |
Similarly, what is intended when presenting the information contained in the General Balance Sheet of the companies in this way is to separate the different environmental items from the rest of the accounts that make up the group to which they belong (Assets, Liabilities or Capital). Therefore, in this way, companies would have better control of what assets and resources they invest in developing their business, as well as what are the debts and obligations derived from their actions.
CONCLUSIONS
The development of this work and after analyzing all the above, allows us to reach the following conclusions:
- The proposal of the designed procedure consists of aspects and elements that allow methodologically to establish the particularities and essential aspects associated with the accounting record of environmental variables for each type of company. The incorporation of new accounts and subaccounts will allow the variables to be identified quickly and precisely environmental issues in the company being analyzed, an aspect that adds new value to the accounting information of the business sector Derived from the procedure, a series of particularities associated with the recording and accounting treatment are obtained, and the following stand out: the need to separate expenses and environmental costs of operations and the creation of provisions for environmental purposes.The possibility of presenting the accounting information in the different financial statements, allows companies to have greater control of the resources that are at their disposal for the development of their business, in addition to promoting a better business decision-making process.
BIBLIOGRAPHY
- Provincial Environmental Strategy 2007 - 2010. Santiago Territorial Delegation. Environmental Forum Foundation. Environmental accounting: measurement, evaluation and communication of the environmental performance of the company. European Environment Agency. Barcelona 1999, pp. 5-10. https://www.monografias.com/trabajos16/contabilidad-ambiental/contabilidad-ambiental.shtml Consulted in November 2011. Pelegrin Mesa, Aristides. (2004). Accounting and the Environment Procedures for their evaluation and analysis from the perspective of business management. Magazine of the University of Quetzacóatl México.
Visited Websites.
- http://eventos.fim.uclv.edu.cu/comec/cd-2008/ponencias/c1/c1t11.pdf. Consulted in November 2011.http: //unq.academia.edu/wrc/Papers/343486/El_sistema_de_informacion_contable_y_la_valuacion_ambiental_Enntación_del_usuario. Consulted in November 2011.http: //www.monografias.com/trabajos14/elimpacto-ambiental/elimpacto-ambiental.shtml. Accessed in April 2012. http://www.myriades1.com/vernotas.php? Id = 101 & lang = es. Consulted in April 2012.http: //www.uned.es/biblioteca/energiarenovable3/impacto.htm. Consulted in April 2012.
www.uned.es/biblioteca/energiarenovable3/impacto.htm. Consulted in April 2012.
Environmental accounting: measurement, evaluation and communication of the environmental performance of the company. European Environment Agency. Barcelona 1999, pp. 7.
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