Question

Discuss how management accountants can apply environmental and sustainability decisions to capital budgeting and life cycle costing decisions. Support your answer with at least one example of environmental management accounting decisions in capital budgeting and life cycle costing decisions.

Answer 1

Environmental accounting concerns the definition, assesement and allocation of environmental costs and expenditures for the purpose of cost and resource management, compliance reporting and capital budgeting, planning and operational decision making. Environmental accounting can be further delineated in touch two areas : Financial environmental accounting and managerial environmental accounting . Organisations would effect environmental factors in their accounting processes via the identification of environmental costs attached the product, processes and services. It must be recognised that most management accounting techniques  significantly underestimate the cost of poor environmental behaviour. many overestimate cost and underestimate the benefits of improving environmental practices. Example: the cost of uncompensated health effects and environmental impacts.