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Principles of Accounting, Volume 2: Managerial Accounting

Chapter 13

Principles of Accounting, Volume 2: Managerial AccountingChapter 13

Chapter 13

Multiple Choice

1.

B

3.

D

5.

D

7.

B

9.

A

11.

A

13.

D

15.

C

Questions

1.

Sustainability is meeting the needs of the present generation without compromising the ability of future generations to meet their own needs. Corporations can incorporate sustainability practices into their businesses in a variety of ways; through the reduction of greenhouse gas emissions, through efficient use of water and scarce resources, and by ensuring that employees have access to a safe working environment, adequate health care and that they are not exploited with an imbalance of power between the employer and employee. Responses may include a variety of suggestions.

3.

An oil company might include measures as to how they would sequester excess carbon emissions in their production phase. They may also include information about both environmental and employee safety measures implemented. The company may also provide information on how they have improved the communities in which they operate. A car manufacturer might include a good deal of information on employee well-being as well as community outreach and philanthropy. The company may also provide information on moves toward more environmentally sustainable new automobiles. A large retailer might provide information on GHG reductions through improved energy in their value chain as well as employee well-being programs. The company might also demonstrate its community outreach, and that products are sourced from ethically sustainable suppliers. For example, Walmart has announced that they will no longer sell cage eggs, selling only barn-laid and free-range eggs.

5.

With the exception of lenders and major shareholders, the majority of these stakeholders are not able to command tailor made sustainability information and so are reliant upon disclosures by the organization. At present there is little legal requirement of non-financial disclosures related to sustainability unless there are material factors which may affect the investment decision-making of a user.

7.

Answers will vary. Sample answer: without a mandatory framework for sustainability disclosures, companies can produce “boilerplate reports” that look attractive and claim a lot without saying too much of real substance. However, there is increasing evidence that investors are looking for more than just financial reports and want to know an organization’s environmental philosophy and strategy. Therefore, accountants should prepare sustainability reports.

9.

The SASB is a private sector Sustainability Accounting Standards body that aims to enhance capital market efficiency by encouraging high-quality disclosure of material sustainability information that meets user needs.

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