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'Currently, most companies that report on sustainability publish stand-alone reports. However, a trend toward integrating sustainability reporting with financial results is emerging and is supported by the International Integrated Reporting Council's (IIRC) efforts to develop a global integrated reporting framework. Both stand-alone and integrated sustainability reporting require the involvement of accounting professionals. Accounting majors, many of whom have grown up in an environment that strongly values ecologically, ethically, and socially responsible corporate behavior, represent the future accounting professionals' (James 2015, p.1). Disclosures on organisational behaviour in relation to the natural environment form an essential component of integrated sustainability reporting. This assignment would assist you to explore the ability of the current international financial reporting standards (IFRS) in monitoring the impacts of organisational operations on the natural environment.
- What is environmental reporting? Explain how reporting on environmental issues could be related to the objectives of general purpose financial reports (GPFR).
- Identify two accounting standards (IAS/IFRS) that are relevant to environmental impacts of an organisational operation. Explain the relevance of these accounting standards with environmental issues related to business activities.
- Select the most recently published annual report of a company from an environmentally sensitive sector. Provide a critical discussion of the environmental disclosures in relation to financial accounting reported by the company you selected.
What is environmental reporting?
The accounting that is made mandatory for all public companies to disclose the company's information related to environmental performance in the public is called environmental reporting/accounting. The difficulties that are arising from the environmental issues that are affecting the daily life must be triggered and reported. Environmental accounting happened in the late 80s and 90s when the environmental responsibility of companies was introduced and focus was to prevent environmental damages that are faced by large companies and fight with pollution. All these above factors were playing a significant role in developing the environment accounting. It is an accounting that includes the methods, systems, and activities that analyze, disclose and register the environmental issues of an economic system. In terms of traditional accounting, it consists of two types i.e. one is environmental financial accounting which is employed by interested outsiders and another one is environmental management accounting that is employed while making the decision.
The following issues that must be emphasized especially in the foreground of environmental accounting are as follows:
- Determining and analyzing the costs related to environmental accounting
- Identifying the financial factors of environmental problems, and determining the factor that is promoting while making the decision.
- Determining the factors that influence environmental risks
- Preparing the criteria that are being prescribed by law and forming numerical data related to benefits and penalties.
- Separating the environmental expenses from the total expenses
- Identifying provisions, contingent assets and contingent liabilities related to environmental issues
- Promoting more information, comparability, and content of reports.