Environment Ministry Guidelines Stress Consolidated Accounting

In November 2004, Japan's Ministry of the Environment (MOE) released a working draft of its Environmental Accounting Guidelines 2005; a review committee has proposed this revision of existing guidelines that came into force in fiscal 2002.

The new guidelines generally follow the existing ones, but introduce a proposal to promulgate consolidated environmental accounting for affiliated companies that are part of a corporate group.

The use of consolidated information is already mainstream practice in corporate financial accounting. In the present context of rapid expansion, diversification and globalization of economic systems, any compilation or analysis of information in environmental accounting would also be incomplete unless it refers to consolidated corporate groups; only this method will give a complete picture of corporate activity that effects the environment.

The scope of consolidation differs depending on the environmental impacts in question. If affiliated companies have large impacts on the environment, spend a great deal on environmental conservation, and/or are engaged in activities that by definition significantly affect the environment, their activities would require consolidated accounting regardless of the size of the companies.

The Ministry expects this environmental accounting system to be adopted by about 50 percent of listed companies and 30 percent of unlisted companies by 2010. According to a survey in 2003, 661 companies (32 percent of listed companies and 17 percent of unlisted companies) already implement this method. Guidelines thus revised will be easier to use for these companies, and will result in reports that are more comprehensible to outsiders.



Posted: 2005/03/11 02:23:59 PM
Japanese version