REACTION PAPER GROUP 8

PRATIWI BESTARI 1610532017

RATU SHAVIRA 1610532025

Environmental Management Accounting

The use of environmental accounting concepts for companies encourages the ability
to minimize the environmental problems it faces. Many large industrial and service
companies are now implementing environmental accounting. The aim is to improve the
efficiency of environmental management by evaluating environmental activities from the
point of view of costs (environmental costs) and benefits or effects (economic
benefits).Environmental accounting is applied by various companies to produce quantitative
assessments of the costs and effects of environmental protection.
Some reasons why companies need to consider adopting environmental accounting as
part of a company's accounting system include: making it possible to reduce and eliminate
environmental costs, improve the environmental performance of the company which may
have a negative impact on human health and the success of the company's business, expected
to generate more accurate costs or prices for products from desired environmental processes
and enable fulfillment of the needs of customers who expect more friendly products / services
in the environment.
The purpose of environmental accounting as an environmental management tool and
as a means of communication with the community is to increase the amount of relevant
information made for those who need or can use it. In order to achieve success in the
application of environmental accounting, the first and foremost thing that needs to be
considered by company management is the compatibility between evaluations made by the
company against the environmental impacts caused. The second step, determining what is the
target of the company by identifying the main factors that have an impact on the company's
environment and formulating a plan to reduce environmental impacts. The third step,
choosing the appropriate measurement tool in determining environmental problems.
The fourth step, conducting administrative assessments to set targets in each segment.
The fifth step is to produce an accounting segment to measure each company division. The
sixth step, conduct testing in each division. The final step is to review the performance.
Performance reviews are expected to produce accounting segments that can support
environmental management achievements in each division.
Environmental Accounting(Environmental Accounting or EA) is a term that relates to
the inclusion of environmental costs(environmental costs) into the accounting practices of
companies or government agencies. Environmental costs are impacts that arise from both
financial and non-financial aspects that must be borne as a result of activities that affect the
quality of the environment. Environmental Management Accounting (Environmental
Management Accounting) is one of the sub systems of Environmental Accounting which
describes the problem of measuring the impacts of a company's business into a number of
monetary units. Environmental Management Accounting can also be used as a benchmark in
environmental performance
The functions and roles of environmental accounting are divided into two forms.
1.Internal Function Internal
function is a function related to the company's internal parties. The internal party is the
party that runs the business, such as consumer households and other production and
service households. As for the dominant actor and factor in this internal function is the
 leadership of the company. Because company leaders are people who are responsible for
every decision making and determination of each company's internal policies.
2. External Functions External
functions are functions related to financial reporting aspects.
SFAC No. 1 explains that financial reporting provides information that is beneficial for
investors and creditors, and other users in making investment, credit and similar decisions
rationally.
In this function, an important factor that needs to be considered by the company is the
disclosure of the results of environmental conservation activities in the form of accounting
data. Information disclosed to them results measured quantitatively from environmental
conservation activities. This includes information about the economic resources of a
company, claims against those sources (the obligation of a company to submit resources to
other entities or capital owners), and the influence of transactions, events, and conditions that
change economic resources and claims against the source.
External functions give authority to companies to influence stakeholder decisions, such
as customers, business partners, investors, local residents and administration. Therefore,
companies must provide information about how company management is responsible for
managing the owner for the use of economic resources entrusted to him. It is expected that
the publication of environmental accounting results will function and mean for companies to
fulfill their accountability and transparency for stakeholders which is very meaningful for
certainty of evaluation of environmental conservation activities. There are several ways to
disclose information on environmental responsibility, firstly presenting environmental
information through "disclosure" can be done by making an overview of company activities
related to efforts to preserve the environment, the results of independent parties' assessment
of the entity's compliance with environmental sustainability, both reporting responsibility for
the environment as well can be presented in core finance, for example equipment provided in
order to reduce environmental pollution can be presented as a fixed asset.

EMA is very useful for the industry, among others:

(1)Ability to accurately research and regulate the use of materials, including pollution /
residual volume, other types and so on. (2) The ability to identify, estimate, allocate, regulate
or reduce costs, especially costs related to the environment. (3) More accurate and more
comprehensive information in supporting the determination of and participation in voluntary
programs, cost savings to improve environmental performance. Not even more polluting the
environment. (4) Comprehensive information to measure and report on environmental
performance, such as improving the company's image to stakeholders, customers, local
communities, employees, government and financial providers.
There are two approaches in formulating EMA namely (1) Monetary Accounting
(based on monetary procedure) is an effort to identify, measure and allocate environmental
costs based on the behavior of financial flows in these costs. (2) Physical Accounting (based
on material flow balance procedure) is an approach to identify various behaviors of
environmental cost sources. This will be useful for management to base the allocation of
environmental costs that occur.
Environmental accounting is one strategy for managing the environment by using
environmental management tools that can be applied as environmental conservation efforts,
environmental management accounting provides information on the use of natural resources
and their impact on the environment and monetary information about costs used to improve
the environment so that perceptions can community towards company image and influence
the company's financial performance.