Authors: Adrian Timar, Maria B ac v aran v and Adela Olaru, Mihai Svasta, Oana Tortolea, Maura Teodorescu and
A. Brief Description of the company 1. About the company
SOMES¸ Dej is a Romanian integrated pulp and paper plant, producing:
Bleached/unbleached sulphate pulp (kraft), from softwood—60,000 t/yr Bleached/unbleached wrapping paper—34,000 t/yr
Name: SOMES¸ S.A. DEJ, Member of the HOVIS Group Location: Romania, Transylvania, Dej city
Established: 1963
Privatized: 2000
Shareholders: MFC Commodities GmbH Austria 74.99 %
SIF Banat Cris¸ana 17.64 %
Others 7.37 %
Turnover (2001): 34,108,000 euro Profit (2001): 496,000 euro
Export: 16,749,000 euro
Liquidity
(quick ratio): 0.69 No. of employees: 1,184
Contact Person: Adrian Timar, chief accountant SOMES Telephone: 0040 744-674-894
Email: atimar@hotmail.com
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2. Environmental aspects of the company and results of the CP programme
In April 2001, the management of SOMES¸, recognized the importance of being able to manage the current environmental aspects of the company, and for the sake of future operations and competitiveness decided to join the UNIDO-TEST project.
After the initial environmental review the bleaching unit was identified as the area causing the most significant environmental impacts of the whole plant, due to:
Hazardous pollution generated by the creation of chlorinated organic compounds;
High water consumption compared to BAT;
High material losses (chemicals, product and resources: water, energy) there were not very well quantified.
A number of investment projects were initiated during the TEST projects, which were revealed to be an important catalyst in implementing tech-nological solutions and spreading the environmental culture to employees.
The effects of implemented cleaner production measures resulted in:
A decrease of flow and effluent loading from the mill;
A decrease in specific consumption of chemical at the bleaching unit;
Product quality improvement;
A decrease in maintenance and repair expenditure;
A consumption reduction.
The material balances conducted at the bleaching unit, within the TEST project, revealed significant losses of raw materials that should have been regarded as environmental costs. Figure IV shows the impact of the implemented CP measures on the consumption of chemicals and water at the bleaching unit.
In early 2002, the company became ISO:9002 certified, according to the SR EN ISO 9002/1995 standard24and implemented an environmental man-agement system in accordance with SR EN ISO 14001/1996 standards.
24 The system certification audit was conducted by the Germanischer Lloyd Company.
Figure IV. Effects of Implemented CP Measures at SOMES¸: Reduction of Chemicals and Water Specific Consumption
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As part of the TEST project, management decided to expand the EMA to have a better and more comprehensive approach to management account-ing, with a particular focus on costs related to wasted raw materials and other environmental issues.
3. Management Accounting: current practices, cost centres structure and existing allocation keys
Along with other large industrial companies from Romania, SOMES¸ has changed its cost accounting system from one that was compatible with the previous political structure in Eastern Europe (but is now obsolete), to one that is more in line with international accounting standards that provide management with better information.
[ May 2003 — Bleaching unit : total production 42,000 tons per year ]
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The current method used for costing is generally known as Absorption Costing (AC). The company is organized into five main cost centres, five main auxiliary sections and five minor auxiliary sections as summarized in table 7 and figure V. The method is conducted in several steps:
First, direct costs (direct materials, labour and energy consumption) are allocated directly to the appropriate cost centres;
Second, the overheads (auxiliary sections) are allocated among them through different allocation methods;
Third, the allocated overheads are absorbed into the cost centres, through several absorption keys (proportion of production value, labour, etc.) chosen by department managers.
Table 7. Absorption Costing at SOMES¸
1 Chipping Regeneration Finishing
2 Kamyr Digester (Boiling) Bleaching Agents Packaging
3 Bleaching Chemicals Deposit
4 Pulp Machine Water Treatment Administration
5 Paper Machine Wastewater Treatment Management
Cost
Centre Main Cost Main Auxiliary Other Auxiliary
Number Centres Sections Sections
The main advantage of the system used in SOMES¸ S.A. Dej was that at the start of the project all the expenses and costs incurred during the produc-tion process were traced and periodically reported in internal company documents. The switch from the previous accounting system to absorption costing at SOMES should therefore be considered as a real step forward.
However, in environmental management accounting literature, direct cost-ing or activity based costcost-ing (variable costcost-ing) is considered preferable to absorption costing.25
The only environmental cost category recognized in the management accounting system at SOMES¸, before the EMA project started, was the wastewater plant treatment costs. These costs were allocated to cost cen-tres and to products as overheads. Non-product output environmental costs were not recognized as environmental costs, but were included in the direct material costs, while fines and penalties were part of the gen-eral overheads. In table 8 the main environmental cost items and their allocation method are reported as they were before the EMA project start.
25 For a more detailed explanation see Stefan Schaltegger and Roger Buritt: Contemporary Environmental Accounting, Greenleaf Publishing 2000.
ChippingBoiling/ DigestionBleaching Paper Machine
Bleached Paper Unbleached Paper Bleached Pulp Chemical Water Treatment
Biological Water Treatment Mechanical Workshop/ Maintenance
Transportation Department Industrial WaterDrinking WaterPre-Decanted Water SteamEnergyCompressed Air Auxiliary plants
Pulp Machine
Short FibreChemicals Finishing Unbleached Pulp
Demineralized Water
Regeneration Bleaching Agents
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Figure V. SOMES¸Production Cost Flow
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Modification of the existing management cost accounting system at SOMES¸, to accommodate any environmental costs category, had to take into consideration the country’s financial accounting regulations. The way that production costs are calculated affects the financial performance of the company (the profit) and in turn, the taxes the company has to pay (profit tax). Therefore, there is close link between managerial accounting and financial accounting.
The Romanian accounting legislation is in the process of adapting to the International Accounting Standards (IAS). As a result, currently, both Romanian Accounting Standard (RAS) and IAS are applied within SOMES¸.
According to the RAS and IAS, some categories of environmental costs, such as fines and penalties or environment related overhead labour can-not be considered production costs and are can-not allocated to products. In addition, the regulations that permit the accrual of contingency costs are still unclear.