Management Accounting - Performance Measurement And Control - Essay Example

Management Accounting Student’s name Institution Mаnаgеmеnt ассоunting - реrfоrmаnсе mеаsurеmеnt and соntrоl The question of sustainability of issues in organizations have become very important, it has a relation with political, economic and social issue in the organization (Emilia Vasile, 2012). Economists are the most ardent group that has persistently helped on addressing the issue of sustainability. Sustainability is a resource; it is also a public policy issue which has a lot of impact on the economic development of organizations. Sustainability literally means the capacity to maintain some entity, outcome, or a process over a period of time (Christine Jasch, 2003). One of the theories that explain sustainability is a pragmatic approach which holds that while we may actually have obligation to sustain any other non-human form of life or a process that is ecological in nature. It should not be assumed that all the opportunities that are presented in the future can be measured against one another (Al-OmiriM, 2007). The preservation of opportunities for the future generations requires that we have an enduring existence in some ecological goods. Many critics object to ideology of pragmatic approach from diverse angle, on one hand they look too humanistic, neither the old growth forests nor the threats of the dire survival of the polar bears which are priorities of the pragmatic view. On the other hand they completely insufficiently and humanistic, this way they reduce the sustainability to the survival may multiply unequally and the ongoing poverty (Christine Jasch, 2003). The political theories have the purpose of sustaining the social system that all realize the dignity of the human beings. Concerning the way in which the local government and the global environment having problems which they jeopardize the dignity of the human beings, these particular theories helps in the sustaining the environmental conditions of the fully human life. The environmental justice and the civic environmentalism, these represent one of the strategies of the theory (Al-OmiriM, 2007). One of the subset in which the political theories takes the pragmatist’s approach and then suggest that we must keep maintaining the conditions for keeping an open debate on sustainability(Christine Jasch, 2003). In this particular view, of sustaining a political system that are of deliberate democracy, this effectively requires sustaining the ecological and the economic goods. However, the quantity and the quality of the goods are entirely regulated by the need of the political system; this thereby constrains sustainability and commitment (Al-OmiriM, 2007). The theory of hierarchy of needs may actually be irrelevant in issues of sustainability. The choice of surviving and the security over the satisfaction that may well are a short-run of phenomena. A baby, who is deprived of love, may not have the chance of living to his/her adulthood than a baby who has been deprived of milk (Jasch, 2006). Many people who are thoughtful accept known risks to their individual security in the purposeful search of a higher quality of life through uncertain interactions with many other people with the forces of nature. The quality of life is well rank higher than actually does the quality of life (Emilia Vasile, 2012). Importance of EMA The monetary environmental management accounting refers to a subsystem of the environmental accounting which deals with the monetary impacts of the environmental presentation. This allows the management to batter gives evaluation financial aspects of the product and projects when given the chance to make the business decisions (Emilia Vasile, 2012). Companies and manager of organizations always believe that the cost of environmental aspects is not really that important in their business operations. They do not consider the fact that the costs of production always have an environmental component. An example is the purchase of raw materials; the unused part is emitted in the produced wastes which are not usually considered as related to the environmental cost. These particular costs are usually higher than the initial estimates of the companies (Jasch, 2006). This cost has to be controlled and reduced by putting in place proper cleaner production initiatives. In the process of identifying and controlling the environmental cost. The EMA systems have helped the environmental managers justify projects of the cleaner productions. Through the EMA the managers have identified new ways in which they save money (Jasch, 2006). A good use of the principles of EMA has assisted the manager to identify the environmental cost that is always hidden in the general accounting system. When they are hidden it is hard to comprehend the cost that is related to some particular product or process or maybe is actually environmental (AbernethyMA, 2001). Inability to separate this portion of the overall cost from that of production, and pricing of products will always appear more profitable than they really are. This is due to the fact that some of the cost of production is hidden, and they are sold under priced. Since the prices of the product which maintains their demand and greatly encourages the organizations to continue the production, perhaps even more than that of the less polluting product (Al-OmiriM, 2007). The implementation of the environmental accounting will greatly increase the benefits of the environmental tools of management. Apart from the cleaner production assessment, EMA is very important especially in the evaluation of the importance of environmental aspects and impacts (Jasch, 2006). EMA also helps in prioritizing the potential actions that help in the implementation and the operations of the environmental management systems. EMA also depends greatly on the physical environmental information. This requires that the environmental manager and the management accountant operate closely and this will results in an increased awareness of each other’s apprehension and the needs (AbernethyMA, 2001). Just as a tool, the EMA can be used for sound product. The process or investment project of decision making. An EMA information system will enable the business to evaluate in a batter way on the economic impacts of the performance of the environment of their business. Changing roles of management accountant The management accounting can be defined as the process of collecting and recording the most useful information and the statistical data as well as reporting them to make decision. In the early times many studies placed the management accountants in a scope that provide all the levels of management with very high quality scorekeeping and problem keeping information (AbernethyMA, 2001). The management accountants provide the management with data that is used in establishing policies, development of plans and the control of operations. The management accountants have also gone ahead to do the analysis and the representation of data according to the needs of the recipient. In management accounting there are many divisions which include cost accounting, cost analysis, cost reduction, and finally cost control (Al-OmiriM, 2007). Management accountant’s collects information which is relevant for the decision making, they have focused on the supply of information to the management. The management play major role in deciding which information should be given out, this information captures the aspects of communication information and the control of the systems and ways in which information gets to the manager who are the recipients (Al-OmiriM, 2007). Management accountants have also become internal business consultants, strategic management consultants. They have literally turned into hybrid accountant. The management accountants have also gone ahead to give an addition to the principals of financial analysis, they have also captured the good knowledge of the business the firm operates in, they have put fluent communication skills and great knowledge of taking charge of the projects management(AbernethyMA, 2001). The modern management accounting has changed its role from being controller to being business supporter or internal business accountant. They are involved in bigger topics such as strategy, information systems, and the implementation and the change of management (Burns J, 2005). The management accountant in the recent times need to have skills on the design of cost management systems and be involved in the process of making decisions in the business. The management accountants have also transformed from being just information processors to being the strategic business advisors (AbernethyMA, 2001). Challenges in assessing environmental costs It is apparent that environmental costs are a modern doctrine enumerated from externalities. The emergence of environmental costs is encompassed in the significant effect of the costs on both production and pricing strategies (Environmental externalities, 2004). G H Michell & Sons is undertaking an overhaul set to institute working environmental cost assessment mechanism. As is the case with any change venture, it is impossible to redesign an entire infrastructure within a day. Change of this magnitude and intensity requires some time before initialization and result resolution. This implies that, G H Michell & Sons should not expect results instantaneously as the change process takes time before eventuating. In light of these sentiments, there are probable dynamics that might challenge G H Michell & Sons desire to assess environmental costs. First, the environmental costs assessment is a new technique seeking to aid manufacturer’s plea of reducing production costs. According to economists, manufacturers have to design working policies that ensure production costs are at minimal levels. With the current global economic crisis, manufacturers experience an arguable profit reduction. To avert any further losses that might pave the way to foreclosures, manufacturers have sought to assess costs individually. Environmental costs are among the new doctrines instigated by manufacturers as they separate cost factors. It is notable that environmental costing is a new discipline though it has been in the public domain for long (Epstein, 2008). This is because business stakeholders are aware that some of their activities affect the surrounding community or environment. With this in mind, the quantifying element has taken years to accomplish until the recent past. This implies that there is limited material as to what pertains environmental costs, their calculations, and other salient factors. It is imperative that manufacturers and other investors engage inconclusive discussion seeking to illumine and discuss the key highlights. Lack of inadequate information is not the only challenge that might curtail G H Michell & Sons desire to evaluate environmental costs. Human resource is another diabolical challenge undermining the attainment of environmental impact evaluation. This is because most employees in the production sector with impeccable training and experience lack information and training on environmental costs. As prior indicated, the concept of environmental costing is new. This implies that there is a significant deficiency of employees bearing the required skills to combat environmental costing (Cairncross, 2007). For any organizational endeavor to thrive and flourish, the workforce forms a primary prerequisite. G H Michell & Sons has an inalienable challenge that calls for urgent redress. The management should focus on adherent training to ensure that the workforce acquires necessary enlightenment, education and training on environmental costs and evaluation. This way, both the management and workforce will work hand in hand in trying to attain stipulated objectives. It is prudent to note that, environmental costs are more of a provision that the direct cost allocation. This emanates from the fact that, manufacturers do not incur the costs directly but after production. The essence of environmental costing is to evaluate the magnitude of the externality, weigh it then mitigate further destruction. For instance, a company dealing in massive production using ancient emission methods significantly destroys the ozone layer. This implies that the company incurs environmental costs (Joshi, Krishnan & Lave, 2011). Quantifying the scale of the environmental cost is difficult; hence, only a provision is made. Additionally, previous litigation is used in quantifying the environmental costs indicating subjectivity. Though formulated for a worthy cause, the implementation of environmental costs has a myriad of challenges that will clear in the course of time. Another challenge facing the implementation of environmental cost is regulatory guidelines entrenched in the constitution. G H Michell & Sons has to assess the requirements of Australia’s constitution to avoid double commitment. This is because, before the enactment of environmental costing, the governments had the mandate to safeguard citizens from manufacturing corporations. This implies that there is previous requirement that sought to hold corporations accountable for emitting injurious wastes to the environment. Since the intention of environmental costs is similar to that of the entrenched laws, there is a possibility that the pieces of the statute might lead to double payment. It is imperative that the management of G H Michell & Sons discuss on the amicable way forward to avoid any conflicting provisions. The inherent challenge that underpins the successful implementation of environmental costs is the fact that it is a new concept based on past ideas (Cairncross, 2007). Inadequate information dissemination, training and quantifying methodologies, are not yet elaborate. G H Michell & Sons has the responsibility of ensuring the probable challenges are addressed to negate looming trouble into the future. According to Jasch, annual total environmental costs portray frightening revelations depicting inefficiencies Modern production companies engage in massive capacity output seeking to maximize on returns. Economists assert that, massive production attracts economies of scale lowering production costs and increasing returns. Similarly, producers desire to attain massive production scales that will increase their output to meet the ever-increasing demand. Since the population is on the verge of tripling, demand on commodities has hit an all time high. All indicators affirm that producers have the right to maximize their output as well as returns. The repurcation emanating from newly developed and technologically intensive production hubs is wanting. The current report released on the ozone layer destruction left the world at awe and in disbelief. This is because it indicated the ozone layer is detrimentally affected by manmade endeavors. Additionally, since time in the past, institutions have not been stern in seeking to implement environmental conservation laws. However, the repurcations of manufacturers and other stakeholders on the ozone layer and entire environmental degradation is evident. This affirms that, the environmental costs incurred is exorbitant only that the perpetrator walk scot-free. This implies that the effect of the environmental cost framework is to quantify the harm incurred to the surrounding, which is many more than accounted. With such enlightenment, it is prudent to indicate that, the environmental costs are an absurd indication of the level of incompetent waste disposal methodologies (Hunkeler, et al 2008). It is saddening to indicate that corporations built at this day and age contribute to injurious waste disposal a topic that has elicited arguable debate the world over. Manufacturers have been ignorant to that calls by government and other conservation parameters to ensure that they do not continuously dispose waste or emissions to the environment. Managers and other stakeholders have ignored the cries of injured community members for a long time. Negative externalities have severe effects that have not been addressed in the past. Organizations have not been put to task in the past to explain the damage they cause to society. Given the poor law infrastructure, manufacturers have been evading responsibility. The environmental costs are now quantifiable, and each manufacturer can clearly view the harm in cost scales. The figures only indicate that, since organizations have not been put to the task, they are incompetent in dealing with environmental issues. Ever since the inculcation of environmental costing laws, manufacturers have reduced production significantly. This is because of the fact that, there is a direct link between the size of a plant, production capacity, the emissions, and the environmental costs. A more elaborate plant has a bigger capacity and contributes significantly to environmental degradation. Consequently, such a company producing harmful waste will have to pay dearly through high environmental costs. This is the fundamental reason as to why companies have restricted their operations to a set level of productions. It is clear that, the higher environmental costs incurred by a company, the poorer the emission and waste disposal tactics. As evidenced in G H Michell & Sons, since the new costing design indoctrinating environmental costing was adopted, the production of dirty wool seems unprofitable. This is essentially because of the fact that, the company has been ignorant for a long time pertaining emissions and other waste products disposed emanating from the production process. This is an indicator of high levels of incompetence regulated by the new framework. It is worth indicating that the new costing design apportions all costs informing management on the significant environment degraders. G H Michell & Sons is well aware that the production of dirty wool is unprofitable as many of the revenue covers the environmental costs. Without the incorporation of these costs, the company would divert these funds into the profit kitty continuously injuring the society and environment at large. This affirms that, companies have been inefficient for a long time and the environment cost is among the few indicators unraveling this fact (Epstein, 2008). Environmental conservation is a highlight of most organizations as a doctrine entrenched by the government. There are strenuous challenges allied to the inception of this new law in organizations. Ranging from inadequate information to insufficient training, environmental accounting is still at infancy. Companies have in turn reduced production capacity significantly since the adoption of environmental costs. Companies have slashed production capacity because, environmental accounting replicates to exorbitant figures. Instead of incurring losses, reducing production is the only logical decision that maintains a company afloat and negates environmental degradation. These momentous annual costs represent inefficiencies that require urgent redress seeking to negate further repurcations. Conclusion The importance that is attached to the environmental management accounting cannot be underestimated. It does not only depicts a lot of value in environmental management decisions but also it has impacted on the development of environmental management systems which has a lot of impact on the day to day activities of the business organization. It is recommended that companies which are going concern use the environmental management systems in their business, this is due to the fact that the ideology has more than many can imagine. References Cairncross, F. (2007). Costing the earth: the challenge for governments, the opportunities for business. Boston, Mass.: Harvard Business School Press. Environmental externalities and social costs of transportation systems measurement, mitigation, and costing : an annotated bibliography. (2004). Washington, DC: The Administration. Epstein, M. J. (2008). Making sustainability work: best practices in managing and measuring corporate social, environmental and economic impacts. Sheffield, UK: Greenleaf Pub. ;. Hunkeler, D., Lichtenvort, K., Rebitzer, G., & Ciroth, A. (2008). Environmental life cycle costing. Pensacola, Fla.: SETAC ;. Joshi, S., Krishnan, R., & Lave, L. (2011). Estimating the Hidden Costs of Environmental Regulation. The Accounting Review, 76(2), 171-198. Read More