Business environment is dynamic and has evolved over the years. This has resulted in the development of a number of contemporary accounting changes to cope up with the evolving business environment. These contemporary issues include; computerised accounting, human resource accounting and, social and environmental accounting.
Computerized accounting involves using computers and the various accounting packages for book keeping and production of various financial and managerial reports. This has been necessitated by the need to manipulate larger sums of money and increased complexity of financial transactions.
Human resource accounting involves measuring and recognizing intangible human expertise in management and financial accounting. Transformation of the global economy from a manufacturing based economy to a knowledge and information-based economy triggered the need to develop tools to measure human resource value. Economies have transformed from industrial economy where plant and machinery were the core assets to post industrial economy where intellectual property and particularly human capital is the core asset .
Social and environmental accounting involves recognition and disclosure of an entity’s social and environmental costs and liabilities. Social and environmental accounting seeks to broaden the scope of financial accounting and reporting. An entity is compelled to consider more than mere economic events and is accountable to a wider range of stakeholders. Legal and regulatory obligations also impose a duty on entities to incorporate environmental cost and to be socially and environmentally responsible.
Social and environmental accounting can be approached from two main angles; accountability and management control. Social and environmental accounting for accountability reasons is designed to facilitate and support the pursuit of society's expectations. These expectations include; balancing corporate power and corporate social responsibility, honouring various stakeholders' informational rights, transparency in corporate activities and Identification of social and environmental costs and liabilities of economic success. Social and environmental accounting for purposes of management control is meant to facilitate and support the pursuit of an entity's own objectives. Benefits to the organization include; increased information available for decision-making, increased accuracy in product and service costing, enhanced corporate image and public relations and Identification of opportunities for market development.
Accountants rely on existing Generally Accepted Accounting Principles (GAAP) since there are no specific GAAP guidelines to guide accountants in social and environmental accounting. Their most common practise has been to consider environmental and social costs as loss contingencies. Financial Accounting Standard Board,(FASB) number 5 defines and provides a guideline of how to report loss contingencies, while FASB number 14 provide a guideline of estimating them.
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