External costs – accounting perspective
External costs – accounting perspective

Author(s): Ewelina Kuberska
Subject(s): Social Sciences, Economy, Business Economy / Management, Sociology, Management and complex organizations, Economic development, Environmental interactions, Accounting - Business Administration, Marketing / Advertising, Business Ethics
Published by: Wydawnictwo Uniwersytetu Ekonomicznego w Poznaniu
Keywords: accounting for externalities;corporate reporting;directive on disclosure of non-financial information;evaluation in accounting;external costs;full cost accounting;sustainability accounting;
Summary/Abstract: Nowadays, shareholders would like to receive more information about companies’ activities. They would like to know how the company treats their local community, how their activities influencethe environment or even if the company’s activities are harmful for society. This information is needed and has to do with costs for society. Tracking these costs, called external costs, more precisely seems to be becoming more important in accounting and is starting to become a new research area.The need for treating external costs like a part of research in accounting is indicated by a trend of the accounting of social responsibility, the theory of legitimacy in accounting, the concept of full cost accounting and the directive on disclosure of non-financial information. The use of the environment isn’t free of charge for companies. According to national laws, companies are obligated to pay environmental fees or taxes when using the environment. Existing fees and taxes for using the environment don’t resolve the problems of measuring and evaluating the external costs in companies. What is important to note is that external costs are connected with using goods such as air, soil, water,silence or the aesthetics of the surroundings. They all are non-marketable goods; they don’t have prices on the market. Therefore, one of the non-market valuation methods could be used to evaluate them. One of the biggest problems for accounting in the future will be measuring the volume of using these goods or measuring the size of reduction in the quality of public goods suffered and assigning the decrease to particular companies.

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