2nd ICAI 2022

International Conference on Automotive Industry 2022

Mladá Boleslav, Czech Republic

Figure 1: Incorrect allocation method of environmental costs on produced products

Source: own elaboration (2021) The second approach shown in Figure 2 is more accurate because the company correctly identified the negative environmental impact caused during the production of “Product B”. For this reason, the company directly increases the cost of this product and does not incorrectly increase the cost of “Product A”. This way of environmental costs allocation could cause a crucial impact on the sale of these products because based on the method described in Figure 2 the company reports lower costs of “Product A” and higher costs of “Product B” in comparison with the method shown in Figure 1.

Figure 2: Correct allocation method of environmental costs on produced products

Source: own elaboration (2021)

3. Problem Solution As we can see, the way of allocation environmental costs is not regulated by legislation, and therefore the accounting entity can choose the system of their allocation itself. If the company wants to achieve the most accurate results, firstly, it is important to responsibly measure and report environmental costs and secondly, to allocate them to the appropriate products.

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