Questions and Answers of Accounting Practice

A small business is more likely to prosper and to control its operations effectively by monitoring cash flows than by listening to its accountant. Discuss.
In what ways is a cash flow statement likely to be useful?
Why should small businesses produce accruals-based accounts (as opposed to relying on controlling cash and banking)?
The published accounts of companies have steadily become more complicated, with additional statements, notes and disclosures, as required by accounting standards. Conventional financial accounting is
Analyse a number of companies’ cash flow statements. Which figures seem to give the best indication of a company’s performance? Can ‘free cash flow’ be assessed, and does it provide a useful
Analyse a number of companies’ statements of financial position and calculate their current ratios, liquidity ratios and capital gearing ratios for the last two years. What do these ratios tell you
The financial statements of a small business are likely to reveal any liquidity problems; the financial statements of a major listed company are more likely to disguise them. Discuss.
It is useful for companies to have detailed analysis and control of all cash flows. Why would they want additional, accruals-based information?
Standards can be technical, performance-based or process-based. Distinguish between these three categories and identify the category that applies to standards for environmental management systems.
What are the main similarities and differences between BS 7750, EMAS and ISO 14001? Is one of these systems to be preferred over the other two?
What are the main functions of good environmental management? Which environmental management tools are related to each of these functions? Are there any environmental management tools common to all
Eco-control has been explained with use of three different approaches.What is eco-control? Explain the difference between the three approaches. Is there a link between the integrated approach and
Eco-control has five procedural steps.Think of an important corporate environmental intervention (e.g. emission of waste-water). With reference to this corporate environmental intervention, explain
‘Information management is the core of any environmental management system.’ Do you agree with this statement? How important is accounting information in an environmental management system?
Portfolios are constructed to reduce risk for a given level of economic return. In this context, why would a company be interested in constructing an ecoefficiency portfolio?
Is there any notion of a trade-off between risk and return involved in an ecoefficiency portfolio matrix? How are ‘green stars’ and ‘dirty dogs’ related? In your answer cite examples from an
Implementation plays a critical part in environmental management.Why might environmental management fail at the implementation stage? Can these reasons for failure be corrected or avoided?
Redesign and implementation of accounting and reporting systems to incorporate environmental and ecological considerations faces a number of practical considerations. List and rank four of these
What is the main difference between environmental accounting and ecological accounting?
Why might ‘deep green’ environmentalists favour the presentation of corporate information in ecological accounts but reject disclosures in environmentally adjusted financial accounts?
Which environmental management concept encourages managers to favour the combined development of internal ecological accounting and management accounting. Explain.
Why should business worry about the environment? How might ecological accounting help reduce such worries? In your answer consider the views of three different stakeholders.
Should accountants establish themselves as a community of experts on ecological accounting and reporting issues?
Triple-bottom-line reporting, based on the notion of ecologically sustainable development, aims to report on financial, social and ecological positions and impacts. Is ‘ecological’ accounting and
Distinguish between environmental impact, environmental quality and environmental effect. How are these related to life-cycle assessment?
Products, geographic sites and businesses represent three objects for the collection, classification and communication of physical environmental information.Are these three objects related in any
Stocks and flows are important in the management of a company’s financial affairs and in the management of its ecological affairs (or of its impacts).What, if any, is the interrelationship between
Tools of environmental management need to be eco-efficient. What is ecoefficiency?What is an eco-efficient tool? Provide a critical analysis of the view that conventional life-cycle assessment is not
Explain each of the relationships outlined in the quadrants in Figure 10.1 (page 239). Detail the actions that would lead to a favourable change in direction in each of the four relationships
List the problems with life-cycle assessment. Explain which level of management is appropriate for addressing each of these problems.
What are the advantages and disadvantages of certified environmental product declarations? Assuming that you are the environmental manager of Global Autos, with companies operating in Sweden,
Describe the environmental impact-added life-cycle chain. Select one particular industry and list the environmental interventions for each function in the chain. Rank the functions in terms of their
Background inventory data represent average environmental interventions related to a particular material used in a particular industry.Who supplies such information? Why has background inventory data
For a small eco-tourism company keen to use life-cycle assessment for competitive reasons, is a streamlined life-cycle assessment, life-cycle review, matrix approach or comprehensive approach the
Scientific uncertainty about emissions data can be large. The precautionary principle suggests that decision-makers err on the side of caution when there is scientific uncertainty. Examine the data
What is the ‘free-rider’ problem? Why does it discourage innovation in environmental protection and the adoption of high environmental standards? Can anything be done to overcome the free-rider
Is there a link between product-specific and site-specific life-cycle assessment?Which of these practical ways of drawing boundaries to the life-cycle assessment system will best help companies to
Internal ecological accounting provides information for a number of internal environmental impact added objects. What are these objects? Does internal ecological accounting information differ
Are there any circumstances when top management will be interested in detailed ecological accounting information? Explain.
How does an EIA statement add value for internal management?
What is an eco-asset sheet? Does the value of eco-assets balance with those of eco-liabilities and eco-equity?
What is critical natural capital? Provide examples. For a company, who determines whether natural capital is a ‘critical’ ecological resource? Is there a difference between ‘other’ natural
Why is it that techniques for putting financial values on eco-assets are fraught with difficulty?
Compare environmental stocks and flows with financial stocks and flows.When tracking and recording these stocks and flows, what are the similarities and differences in processes used?
List the main categories of data quality. Do environmental indicators use all, some or none of these categories. Provide an example to support your view based on one environmental medium (e.g. water
Distinguish between the main approaches to impact assessment. Explain the three steps that lead to construction of an EIA index. Can environmental impact added ever be negative?
Construct an environmental profile for a company of your choice. How might the profile be of use to management?
The field of ‘ontology’ studies different views of reality. Why are different ontological viewpoints important when determining the volume of information that needs to be produced by an
Name and explain two allocation rules and two allocation keys. Why are allocation rules and keys important to lower-level management? If you were a site manager in a chemical company, with a single
Can the environmental impacts of one EIA centre be linked to the environmental impacts of another EIA centre? Provide an example to confirm your view? Do any control or responsibility problems arise?
Distinguish between direct and indirect environmental impacts of a division.Provide an example to illustrate the difference.Why is the difference important to a site manager?
‘Environment regulations require investments in end-of-pipe technology to clean up pollutants’: Explain whether you agree with this statement. Does this mean that a company should not undertake
What is the main difference between core and supplemental ecological indicators?Provide an example of each.Would it be useful to have all production site managers to report to top management on a
Examine the suggestion that small and medium-sized companies do not need information from a core set of ecological indicators related to their business.
Net present value and net present environmental impact added have a number of similarities and differences. List and explain these. Consider the arguments for and against discounting future
What are the pressures on managers to report biased ecological impact information to stakeholders? How might these be alleviated?
Regulation can no longer be viewed simply in terms of ‘command and control’over companies. Discuss two alternatives to direct regulation and explain, by using the notion of an enforcement
By using the five principles of regulatory design outlined in this chapter, consider how ecological reporting to external stakeholders provides a fundamental foundation for regulation of
Are conventional financial accounting and external ecological accounting complements to each other or substitutes for each other? Discuss.
What are the features of the US Toxic Release Inventory that other ecological reporting systems should consider adopting? Are there any problems with the TRI reporting system? If so, how can these be
How many chemicals should be reported on in toxic release and national pollutant inventories and polluting emissions registers? What criteria have affected your choice?
Why is monitoring and information disclosure critical for the success of emissions banking and trading?
Do the principles behind the indicators put forward by the UN Commission on Sustainable Development have any connection with the principles behind corporate external ecological reporting? Are there
What are information quality and environmental quality? Are they related? Why is low-quality information said to drive out high-quality information?
How might low-quality information in ecological statements be improved? In your answer, name two specific institutional mechanisms.
What assumptions underlie ecological accounting? Consider whether one assumption behind ecological accounting and reporting is more important than the other assumptions.
How do the notions of ‘going concern’ and ‘gone concern’ affect ecological statements?
Do the needs for and uses of internal and consolidated ecological accounting differ? If so, how? Are the two related?
What is eco-efficiency? How is it measured? Why is it measured? Where is it reported?
List the main stakeholder groups in a company. Consider whether and why each stakeholder group might be interested in corporate eco-efficiency indicators.What level of information is each group most
What is an environmental intervention? How are environmental interventions and eco-efficiency related?
‘Eco-efficiency provides a measure of “win–win”—an action is undertaken if it saves money and environmental interventions are reduced.’ Is eco-efficiency too concerned about saving money
What are the three steps that can be taken along a corporate eco-efficiency path?How are the five modules related to development of a measure of eco-efficiency?
Why is the distinction between general and specific indicators of eco-efficiency important for accounting in (a) ecological and (b) financial terms?
Benchmarking of eco-efficiency indicators faces a number of practical problems.What are these? Can they be overcome? Why is internal benchmarking more common than external benchmarking?
The objective . . . is not to develop one single approach to measuring and reporting eco-efficiency. Rather it is to establish a general, voluntary framework that is flexible enough to be widely
‘Eco-efficiency provides necessary but not sufficient indicators of environmental performance.’ What is environmental performance? Provide an example of another type of information that is
How are the limits on using eco-efficiency indicators related to accounting?
How do stakeholder groups relevant to environmental management accounting and environmentally induced financial accounting differ?
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?
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
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
Present a critical appraisal of the argument that only one international standardsetting institution is needed to establish financial reporting standards relating to environmental issues.
Tax-deductibility of clean-up costs—asset or liability?The IRS [US Inland Revenue Service] reversed its position on the accounting treatment of environmental clean-up costs in Revenue Ruling 94-38.
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
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
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
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.
How important are environmental disclosures in the management discussion and analysis section of an annual report? Explain.
What is shareholder value? Given that there is a range of stakeholders interested in corporate environmental impacts, what arguments can be advanced for emphasising shareholders and ‘value’
Is there a relationship between the number of accounting standards issued and demand for accounting and auditing services? Explain this relationship. Given this relationship, should environmental
‘Shareholder value is cash-oriented.’ Do you agree with this statement? Give reasons.
Shareholder value, as a concept, faces a number of problems. List these problems. Can any of the problems be overcome?
Are systematic and unsystematic environmental risks related? Why, or why not?Are banks concerned about systematic environmental risks? Are insurance companies concerned about unsystematic
What set of eco-efficiency characteristics is the shareholder value approach concerned with identifying?
Can option values be used to promote corporate legitimacy?
What are the main characteristics of the conventional accounting and ecological accounting categories? Why is the distinction necessary?
Explain the two major types of measure used in conventional accounting and ecological accounting. When consideration is given to environmental issues in accounting, what are the two main groups of
What is the difference between management accounting and the other two types of conventional accounting—financial accounting and other accounting systems?
What is the difference between internal ecological accounting and the other two types of ecological accounting—external ecological accounting and other ecological accounting?

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