Financial Performance Management.2 INTRODUCTION.1 PART 1 Environmental Cost Accounting

Financial
Performance
Management

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
Environmental management accounting......................................................................................1
Environmental costs.....................................................................................................................2
The way in which costs vs benefits being used...........................................................................3
The techniques that are used by management accountants to identify and manage
environmental cost along with examples.....................................................................................3
Reasons for the importance of management of environmental cost for an organisation.............3
The way in which environmental costs are recorded and identified...........................................3
The way in which all the environmental costs are controlled.....................................................4
The way in which environmental costs are accounted for...........................................................4
PART 2............................................................................................................................................4
Importance of decision-making processes and the way in which management accountant gain
right information..........................................................................................................................4
Different types of planning tools and the way in which they are helping businesses to solve
financial problems that are faced by them...................................................................................6
Relevancy of budgetary control...................................................................................................7
The way in which KPI is improving financial performance........................................................7
The way in which businesses can gain financial stability...........................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Financial performance management could be defined as the process which is required to
be focused by all the businesses for assuring that the financial performance is maintained. It is
very important for the entities to pay attention towards it because it can facilitate the attainment
of all the planned goals and objectives (Al-Musali and Ismail, 2016). For an enterprise it is
essential to be focused with management of financial performance because it is required to be
maintained to sustain in the market. Main aim of present report is to understand the importance
of financial performance management for an enterprise so that it can meet all its desired goals
and objectives. This assignment covers various topics such as discussion of the issues that are
faced by businesses in managing the environmental costs along with the methods that are used to
account it. Apart from this, critical discussion of the way in which businesses incorporate
management accounting planning tools to deal with financial performance is also covered in this
assignment.
PART 1
Environmental management accounting
Environmental management accounting could be defined as the analysis, collection, use
and identification of different types of information for decision making which is performed
within the organisation. It addresses the needs of management related details of managers for
performing the corporate activities that are leaving impact upon the environment. Some of the
environmental effects can include consumption of water and power, carbon foot print, production
effluent, recycling etc. In context to this there are various types of management information
which is focused by the management accountants. Some of them could be analysed with the help
of following points:
 Identification and estimation of the costs which are related to environment activities.
 Different benchmarking activities against the best practices in context of environment.
 Assessment of impact and likelihood of environmental risks.
 Paying attention towards environment related indicators which are part of performance
monitoring on daily basis (Augustyn, Elshaer and Akamavi, 2019).
 Monitoring and identifying the ruse and cost of different types of resources such as
electricity, fuel and water so that plans for reduction of their use could be formulated.
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 Paying attention towards assuring that environmental considerations are treated as the
part of decisions that are formulated for the purpose of capital investment.
Environmental costs
Environmental cost: All the costs that are connected with potential or actual deterioration
of natural assets because of economic activities. It is very important for all the businesses to be
aware of all of them so that they can find ways to deal with all of them. There are various types
of it which could be analysed with the help of following discussion:
 Cost of internal failure: It includes all the costs that are related to elimination of
environmental impacts that are created the organisations. It is very important for the
businesses to make sure that they are able to pay attention towards these costs as it can
help to reduce the implication of operations upon the environment. All of them take place
when the entity tries to reduce its negative impact upon the environment (Deswanto and
Siregar, 2018).
 Cost of external failure: It is related to the activities that have resulted in damage to the
environment outside the organisation. These are such expenses that have taken place
because of negative impacts of the operations on the environment. It is very important for
the entities to ignore such implications if they are willing to control these costs. If the
business will affect the environment then it will result in higher cost of external failure of
the enterprise.
 Appraisal costs: These costs are related to the process of assessing the compliance with
the environmental policies. It is essential for the businesses to make sure that all the
environmental policies are complied by them because it can help to determine the steps
that are required to be taken to ignore negative impact upon the environment. While
analysing all the policies that are formulated by the legal authorities for the entities to
ignore negative impacts of operations upon the environment these costs take place.
 Prevention costs: All the expenses that are taking place because of the actions that are
taken by the businesses to prevent adverse environmental impacts are known as such
costs. In most of the businesses these costs are taking place as it is very important for
them to make sure that they are preventing adverse impacts of business upon
environment. With the help of it, the operations could be executed in systematic and
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