Deck 17: Sustainability and Management Accounting

Question 1

From the following list of environmental costs, which is the most difficult to include in an environmental management accounting system?

A) Costs on society generally, resulting from the firm's environmental breaches
B) Costs to pay for breaches of environmental rules
C) Costs to monitor the environmental impacts of the firm's actions
D) Environmental reporting costs

Answer 1

A

Question 2

The Global Reporting Initiative (GRI) Framework is a reporting system that aims to:

A) enhance the firm's reputation in the community.
B) enable the inclusion of both financial and non-financial data in the firm's management information system.
C) reduce the risk of future litigation for breaching environmental laws.
D) increase organisational transparency and accountability.

Answer 2

D

Question 3

Which of the following statements is correct about environmental management systems (EMSs)?

A) They are systems that an organisation puts in place to manage their environmental activities.
B) Firms not using EMSs are likely to adopt ISO 14004 for their audit.
C) Firms using EMSs may choose to report narrowly (only on costs that affect profits).
D) EMSs require environmental performance to be measured against policies, objectives and targets.

Answer 3

D

Question 4

Which of the following costs is included in the five tiers of environmental costs?

A) External
B) Preventive
C) Societal
D) Conversion

Question 5

Which of the following reasons, explaining the difficulty of reporting, is unique to environmental and social impacts? (In other words, which of the explanations is an issue relating to environmental and social costs, but does not relate to other costing issues faced by firms?)

A) Future ecological and social issues are not yet known.
B) Many costs and benefits are external (they occur outside the organisation).
C) Many costs and benefits are difficult to quantify.
D) None of the given answers

Question 6

An example of a hidden environmental cost is:

A) monitoring costs.
B) provisions for potential oil-spill clean up.
C) when a firm produces a product that is difficult to dispose of safely.
D) equipment to prevent environmental damage.

Question 7

Which of the following statements about environmental management accounting (EMA) is false?

A) EMA analyses environmental costs for use by the firm's internal decision makers.
B) EMA does not usually include external environmental costs.
C) EMA does not usually include external environmental costs for which the firm is not accountable.
D) EMA when combined with triple bottom line reports includes external costs.

Question 8

When a business is committed to sustainability they will:

A) implement strategies to become more sustainable.
B) strive to achieve a sustainable state.
C) ignore positive economic results to achieve sustainability.
D) choose sustainability over profitability.

Question 9

Which of the following would be classified as Tier 2 environmental costs at Cormack Manufacturing?

A) Materials, packaging, direct labour
B) Packaging, direct labour, depreciation
C) Direct labour, waste, light and power
D) depreciation, direct labour, waste

Question 10

Which of the following costs is included in the five tiers of environmental costs?

A) Conversion
B) Abnormal spoilage
C) Private
D) Relationship and image

Question 11

Which of the following represents the environmental management accounting response to product costing, as compared with the traditional view on recording environmental costs?

A) Environmental costs are spread across all processes and production.
B) Environmental costs are not explicitly recorded in the accounts.
C) Environmental costs are included in the broader sustainability perspectives.
D) Environmental costs are upstream or downstream costs and therefore not included in product costs.

Question 12

The major purpose of environmental management accounting is to enable managers to:

A) improve profitability by reducing environmental costs.
B) be informed about the environmental impacts of the organisation's activities.
C) establish both financial and non-financial measures of performance.
D) improve environmental performance by monitoring management's efficiency in relationship to environmental targets.

Question 13

Which of the following costs is included in the five tiers of environmental costs?

A) External
B) Prime
C) Hidden
D) Conversion

Question 14

How does environmental management accounting (EMA) differ from traditional management accounting?

A) EMA focuses on non-financial rather than financial information.
B) EMA includes environmental cost data in addition to traditional product cost data in the firm's management information system.
C) EMA focuses on external costs to society rather than internal cost data.
D) EMA is a reactive costing technique whereas traditional product costing is proactive.

Question 15

Which of the following costs is included in the five tiers of environmental costs?

A) Conventional
B) External
C) Internal
D) Conversion

Question 16

Reports to stakeholders of a firm's performance on environmental and social issues (sustainability) are called:

A) social audits.
B) environmental reports.
C) triple bottom line reports.
D) All of the given answers.

Question 17

Which of the following costs is included in the five tiers of environmental costs?

A) Contingent
B) Private
C) External
D) Period

Question 18

An example of a societal environmental cost is:

A) monitoring costs.
B) provisions for potential oil-spill clean up.
C) when a firm produces a product that is difficult to dispose of safely.
D) buying equipment to prevent environmental damage.

Question 19

An example of a conventional environmental cost is:

A) equipment to prevent environmental damage.
B) provision for potential oil-spill clean up.
C) when a firm produces a product that is difficult to dispose of safely.
D) lost business because of adverse television publicity.

Question 20

Management accounting techniques that feature in environmental management accounting include:

A) environmental performance measures.
B) life cycle costing.
C) environmental variance analysis.
D) environmental performance measures AND life-cycle costing.

Question 21

From the following, calculate the amount of relationship and image environmental costs.

A) $350 000
B) $355 000
C) $110 000
D) $550 000

Question 22

From the following list, calculate the total environmental external failure costs.

A) $600 000
B) $650 000
C) $660 000
D) $620 000

Question 23

In terms of the five tiers of environmental costs, which of the following costs would be classified as a contingent cost?

A) Recycling of packaging materials from suppliers
B) Inspecting processes and products
C) Loss of future sales due to public awareness of the firm's non-environmentally friendly activities
D) Cost of cleaning up following a chemical spillage in a public waterway

Question 24

In terms of the United States EPA 5 tiers of environmental costs, which of the following would be classified as a Tier 1 environmental cost?

A) Purchase cost of monitoring system of air pollution levels from the factory
B) Auditing environmental risks
C) Costs of occupational health and safety claims
D) Losses associated with loss of reputation due to public awareness of the firm's non-environmentally friendly activities.

Question 25

Which of the following is an example of human capital?

A) Employees' competence and experiences
B) Employees' competence and relationships
C) Employees' relationships and experiences
D) Employees' relationships and networks

Question 26

From the following list of costs, calculate the amount of societal environmental costs.

A) $350 000
B) $355 000
C) $110 000
D) $550 000

Question 27

An example of a contingent environmental cost is:

A) provisions for a potential oil-spill cleanup.
B) when a firm produces a product that is difficult to dispose of safely.
C) lost business because of adverse television publicity.
D) equipment to prevent environmental damage.

Question 28

From the following list, calculate the total environmental internal failure costs.

A) $45 000
B) $40 000
C) $145 000
D) $140 000

Question 29

From the following list, calculate the total environmental prevention costs.

A) $225 000
B) $150 000
C) $175 000
D) $255 000

Question 30

The following is a list of the five tiers of environmental costs. Which of them are described as 'private costs'?
I) Conventional
Ii) Hidden
Iii) Contingent
Iv) Relationship and image
V) Societal

A) i and ii
B) i, ii and iii
C) i, ii, iii and iv
D) All of the given answers

Question 31

Why are Tier-2 costs called 'hidden' environmental costs?

A) They are hidden in the accounts so that stakeholders are unaware of the potential environmental risks of the firm.
B) They tend to be included in other accounts such as overhead and therefore are not easily identifiable.
C) They are uncertain because it is not possible to show them in a separate account.
D) Environmental costs cannot be estimated with any degree of certainty.

Question 32

Which of the following tiers of environmental costs relates to consumer perceptions?

A) Tier 1 - Conventional costs
B) Tier 3 - Contingent costs
C) Tier 4 - Relationship and image costs
D) Tier 2 - Hidden costs

Question 33

From the following list of costs, calculate the amount of conventional environmental costs.

A) $350 000
B) $355 000
C) $110 000
D) $550 000

Question 34

From the following list of costs, calculate the amount of hidden environmental costs.

A) $350 000
B) $355 000
C) $110 000
D) $550 000

Question 35

From the following list, calculate the total environmental appraisal costs.

A) $75 000
B) $80 000
C) $60 000
D) $70 000

Question 36

Which of the following tiers of environmental costs would not be classified as a 'private cost'?

A) Hidden costs
B) Societal costs
C) Relationship and image costs
D) Conventional costs

Question 37

From the following list of costs, calculate the amount of contingent environmental costs.

A) $350 000
B) $355 000
C) $110 000
D) $1 100 000

Question 38

An example of a relationship and image environmental cost is:

A) monitoring costs.
B) provisions for a potential oil-spill cleanup.
C) when a firm produces a product that is difficult to dispose of safely.
D) lost business because of adverse television publicity.

Question 39

An organisation that is committed to sustainability will produce a sustainability report using relevant data. Plus they will also have a:

A) reporting concept.
B) reporting timeframe.
C) reporting period.
D) reporting cycle.

Question 40

Private environmental costs are:

A) environmental costs that directly affect the profit of the organisation.
B) environmental costs for which the organisation can be held legally accountable.
C) environmental costs that can be quantitatively measured.
D) Both A and B

Question 41

Under ISO14031, which of the following is an environmental condition indicator?

A) Percentage of raw materials that are from recycled sources
B) Air quality surrounding a company's main factories
C) The dollar amount spent on developing staff environmental awareness training programs
D) Percentage of suppliers checked for corruption charges

Question 42

Under ISO14031, which of the following is a management performance indicator?

A) Percentage of raw materials that are from recycled sources
B) Air quality surrounding a company's main factories
C) The dollar amount spent on developing staff environmental awareness training programs
D) Percentage of suppliers checked for corruption charges

Question 43

A small to medium-sized organisation wanting to manage their environmental performance with a focus on improving their environmental management systems would be most likely to use:

A) ISO 14005.
B) ISO 14031.
C) ISO 14040.
D) ISO 14064.

Question 44

The international standard of environmental performance indicators include:

A) operational performance, community satisfaction indicators and employee performance indicators.
B) employee performance indicators, management performance and environmental condition indicators.
C) operational performance, management performance and environmental condition indicators.
D) management performance, supplier rating indicators and community satisfaction indicators.

Question 45

How do environmental issues relate to the strategic decisions of the firm?

A) Including environmental costs in business decisions recognises the high cost to the firm of environmentally irresponsible actions.
B) In the planning phase, firms should identify those managers responsible for environmental costs.
C) Environmental risk should be included in the risk assessment of the firm.
D) Socially responsible firms will set stringent environmental targets and measure management performance against those targets.

Question 46

The results of a survey of Australian companies listed on the ASX and the National Greenhouse Energy Reporting Register revealed that a reason for omitting sustainability costs in capital investment decision making was a belief that:

A) sustainability costs were a corporate-wide issue and not specific to a project.
B) sustainability costs were immaterial.
C) it was unknown if sustainability costs would be incurred for the project.
D) sustainability costs were part of the organisation's general overhead.

Question 47

Why is the inclusion of 'environmental performance' likely to become more common in a firm's balanced scorecard?

A) The balanced scorecard must include all stakeholder interests to be complete.
B) It is likely that environmental sustainability is one of a firm's strategic priorities.
C) The balanced scorecard acknowledges that it is no longer adequate to focus only on the major stakeholder (the firm's owner(s)).
D) The balanced scorecard acknowledges that numerous stakeholders are important for business success.

Question 48

An organisation wanting to manage their environmental performance with a focus on Life Cycle Assessment would be most likely to use:

A) ISO 14005.
B) ISO 14031.
C) ISO 14040.
D) ISO 14064.

Question 49

Which of the following environmental issues needs to be accounted for in decision making?

A) The decision making will be flawed if environmental costs that differ between alternatives are not considered.
B) It is possible that a capital investment project will be financially superior but not environmentally superior.
C) Environmental costs are both positive (proactive) and negative (e.g. fines).
D) The decision making will be flawed if environmental costs that differ between alternatives are not considered AND it is possible that a capital investment project will be financially superior but not environmentally superior.

Question 50

An organisation wanting to manage their environmental performance with a focus on measuring, quantifying and reducing greenhouse gases would be most likely to use:

A) ISO 14005.
B) ISO 14031.
C) ISO 14040.
D) ISO 14064.

Question 51

The standard GRI framework compares their sustainability performance globally within industry sectors. This is an example of:

A) comparability.
B) offsetting.
C) benchmarking.
D) analysing.

Question 52

KPMG reported that globally 78% of companies worldwide refer to GRI guidelines in their corporate responsibility reports. According to the GRI (G4) guidelines, the product and services aspect would be categorised as:

A) economic.
B) environmental.
C) social: society.
D) social: product responsibility.

Question 53

When an organisation relates the product value measured in dollars against the resources used this measurement is known as a(n):

A) eco-intensity measure.
B) management performance measure.
C) operational performance measure.
D) eco-efficiency measure.

Question 54

Which of the following is a performance indicator for social performance?

A) Percentage of suppliers who have undergone screening on human rights policies
B) Carbon emission reduction
C) Revenue growth in local markets
D) Percentage of materials used that are recycled

Question 55

Management requiring guidance on how to identify environmental performance measures would research:

A) GRI Framework.
B) IRR Framework.
C) ISO14031.
D) ISO14001.

Question 56

Because environmental issues span the extended value chain of the firm, environmental management accounting uses supply chain management by:

A) identifying and using environmentally sensitive suppliers.
B) assisting customers with environmentally sensitive disposal of the firm's goods.
C) considering cost savings by using customer profitability analysis.
D) identifying and using environmentally sensitive suppliers AND assisting customers with environmentally sensitive disposal of the firm's goods.

Question 57

Which of the following statements about traditional management accounting systems is true?

A) Where environmental costs exist, it is common to find some reporting of environmental costs at the lower levels (tiers 1 and 2).
B) Where environmental costs exist, there is very little reporting of environmental costs at the lower levels (tiers 1 and 2).
C) Where environmental costs exist, there is very little reporting of environmental costs at the higher levels (tiers 3, 4 and 5).
D) Where environmental costs exist, it is common to find some reporting of environmental costs at the lower levels (tiers 1 and 2) AND where environmental costs exist, there is very little reporting of environmental costs at the higher levels (tiers 3, 4 and 5).

Question 58

Under ISO14031, which of the following is an operational performance indicator?

A) Percentage of raw materials that are from recycled sources
B) Air quality surrounding a company's main factories
C) The dollar amount spent on developing staff environmental awareness training programs
D) Percentage of suppliers checked for corruption charges

Question 59

Which of the following is not a good reason for adding a sustainability perspective on the BSC?

A) Sustainability is considered part of the company's core strategy.
B) Sustainability impacts can be captured by the existing four perspectives of the balanced scorecard.
C) Sustainability is likely to impact on the company's reputation.
D) Resources allocated to sustainability issues by top management are large.

Question 60

Which of the following statements is correct?

A) Eco-intensity measures measure the relationship of output to input.
B) Eco-intensity measures measure the relationship of input to output.
C) Eco-efficiency is another term for eco-intensity.
D) Eco-efficiency measures are measures of productivity.

Question 61

Despite the costs involved, measuring environmental and social impacts (sustainability) can provide useful information to assist a firm to achieve a competitive advantage.

Question 62

Unfortunately, because the costs of climate change cannot be classified easily into the current five tiers of environmental costs many firms may find it difficult to reduce these costs.

Question 63

The International Integrated Reporting (IRR) Framework explains how organisations create value over time. Identify and detail the six different kinds of capital that are defined in the IRR framework.

Question 64

Eco-intensity measures are measures of output to input.

Question 65

Just as stakeholders have an interest in a company's performance, this same group of stakeholders also have an influence over an organisation's environmental and social practices.

Question 66

Explain how organisations reflect sustainability as a strategic priority in their balanced scorecard. Provide an example to support your explanation.

Question 67

All tiers defined by the United States Environmental Protection Agency are classified as private costs of the organisation.

Question 68

Intangible benefits associated with environmental sustainability activities are always quite easy to quantify.

Question 69

Define the term 'stakeholder' and explain the role that stakeholders have played in the area of sustainability, highlighting their influence on the organisation.

Question 70

The need to conform to legal regulations is the only reason firms are currently adopting a sustainability approach.

Question 71

Management accountants are rapidly moving towards a system of not only identifying cost drivers, but also identifying new costs and performance measures in supply chain management to produce sustainability reports.

Question 72

ISO14031 suggests three types of indicators on how to identify performance measures. Identify these three indicators and discuss how they provide guidance on how to identify environmental performance measures. Provide examples of each indicator to illustrate the performance measured.

Question 73

Management accounting has always included economic, environmental and social impacts, as many costs are internal to the organisation.

Question 74

Management performance indicators such as the number of cases of non-compliance with regulations, measure the efforts of management to improve the environmental performance of the organisation.

Question 75

Environmental management accounting can be further classified into financial, physical and social.

Question 76

The United States Environment Protection Authority has defined five tiers of environmental costs. Name these five tiers and provide a brief description with an example for each tier.