Discus Environmental issues in Financial Accounting and Reporting

Discus Environmental issues in Financial Accounting and Reporting
1. How do stakeholder groups relevant to environmental management accounting
and environmentally induced financial accounting differ?
2. What reasons can you give in support of, and against, the development of
separate financial accounting guidelines and standards that reflect the financial
consequences of environmental issues?
3. Information disclosed in financial reports should have a number of characteristics (e.g. understandability, neutrality). What are these characteristics?
Provide two examples of situations where there might be a conflict between these
different characteristics.
4. Explain the difference between an asset and an expense in conventional financial
accounting. Are pollution permits an asset? Comment on the view that letting
companies hold pollution allowances as assets is contrary to the aim of reducing
pollution.
Discus Environmental issues in Financial Accounting and Reporting
5. Present a critical appraisal of the argument that only one international standardsetting institution is needed to establish financial reporting standards relating to
environmental issues.
6. Tax-deductibility of clean-up costs—asset or liability?
7. Distinguish between a liability and an environmental liability. Is there any
difference, in principle, between the recognition criteria for normal and environmental liabilities in conventional financial accounting?
8. What are the advantages and disadvantages of permitting counter-claims for insurance claims to be offset in financial reports? Consider the views of management,
shareholders and a non-governmental organisation such as Greenpeace.
9. If ‘grandfathering’ is accepted as the basis for allocating initial emission permits
what is the likely impact on early action (action before trading schemes commence) being taken to reduce emissions? Consider your answer in the context
of the emerging mechanism for greenhouse gas emissions trading.
10. Conventional financial accounting suggests that environmental permits should
be measured by using the historical cost principle. One alternative is that current
market prices should be used instead. Should exit prices that represent opportunity costs of capital tied up in permits, or current costs of replacing permits,
be favoured instead of historical cost?
11. How important are environmental disclosures in the management discussion
and analysis section of an annual report? Explain.