2nd ICAI 2022

International Conference on Automotive Industry 2022

Mladá Boleslav, Czech Republic

Liechtenstein. These mentioned strict rules force car manufacturers to decrease carbon dioxide emission and other harmful gases and exhausts. In addition, car producers are finding that it is more and more difficult to modify conventional internal combustion engines to be able to meet the set emission requirements. Therefore, we can see an effort to increase the share of electromobility in the EEA in response to these standards. The situation in the automotive industry is currently very critical and for this reason, the car manufacturers and their suppliers must dramatically analyse all their costs to ensure the high financial soundness of the company. To be able to meet this goal, the accounting entity must correctly allocate all costs (direct and indirect) related to its production. Therefore, the managers must implement specific rules to be able to manage costs in their company effectively. (Drury, 2013) They must know all processes realized in the company to understand and link the indirect costs with their consumption during the production of their products. (Mohr, 2017) This characteristic is possible to apply to environmental cost as well because among the most relevant criteria for products’ selection are the environmental criteria. (Ballouki, Douimi, Ouzizi, 2018) For this reason, reducing environmental costs has an immediate and substantial effect on the financial performance of the accounting entity. (Jo, Kim, Park, 2015) One of the possibilities of effective reporting and measurement of environmental costs is the implementation of environmental management accounting in the company. (Jamil, Mohamed, Muhammad, Ali, 2015) The main aim of this paper is to present the modern way of allocation of environmental overhead costs on produced products to achieve their correct allocation on production and to express the cost variances between correctly and incorrectly allocated environmental costs on products. 2. Problem Formulation and Methodology OECD defined the environmental costs as costs connected with the actual or potential deterioration of natural assets due to economic activities. (United Nations, 1997) They belong to one of the important groups of costs influencing the final price of produced products (Daniels, Steele, Sun, 2018), not only in the automotive industry. These costs are commonly incurred by accounting entities during the accounting period, and the company should report them in the environmental management accounting. We consider the following types of environmental costs: 1. Prevention costs – costs related to the decrease of processing of wastes, emissions, and wastewater to ensure the lowest negative environmental impact of the company’s activities. 2. Appraisal costs - costs incurred during the accounting period to ensure that the company complies with current environmental regulations such as monitoring environmental effects of all activities of the company that is responsible for. 3. Internal failure costs – costs that are incurred to eliminate the negative environmental impact of realized activities of the company.

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