THE FINANCIAL STATEMENTS Above the insufficiencies and weak points of

the environmental reports and environmental financial statements have been summarised. By striving at the supplementation of omissions and the correction of errors, the environmental reports and financial statements approximate to and support each other.

Interpretation of the notion of materiality

Before outlining the alternatives feasible in my opinion, the problem of materiality must be mentioned, which is present regardless we talk about environmental management or financial accounting. One of the aspects of materiality: who, which business entity is material?

„Small and medium-size enterprises (SMEs) make up 99.8% of European companies. These businesses struggle to keep up with ever-changing regulations. Indeed around three quarters of small firms are currently unaware of their environmental obligations and impacts, according to an October 2007 Communication from the European Commission.” [23].

I think that it is not fortunate to link the requirement of the presentation of the environmental information in a system (in an environmental report or financial statement) to the size of the business entities, as these days materiality is inherent in the environmental information. The obligation of the

presentation of the environmental information should be defined based on the activity of the business entities and should be linked to sector and industry branch.

The other aspect of materiality: what, what type of information is material? Materiality in this approach may be defined based on the size of the business entity, the nature and regularity of the event, and the various threshold values. In general we can say that the information is material if its omission or false presentation influences the users’

economic decisions [24].

Development of the environmental information content of financial statements

One of the directions of approximating the environmental management and financial reports to each other could be that the data and information generated based on the principles and methods of environmental management accounting worked out and accepted up to now would be adopted in the financial statements, naturally without duplicating the information. In my opinion, this would make it inevitable to create a separate standard containing the presentation of environmental information in financial statements, their evaluation and the systemisation of the information to be disclosed.

The primary nature of environmental reports Another direction of the approximation of environmental management and financial reports to each other may be if the information presented or only inherent in financial statements would be adopted into the environmental reports.

For this, however, it is necessary for the environmental reports to have a generally accepted and uniform content and structure, which, in addition to the allowances in kind, include such monetary information and explanations which have been left out from the financial statements, or their presentation is not necessary according to the pertaining and effective financial accounting stipulations.

According to the current financial accounting stipulations, if the business entity prepares an environmental report, this must be indicated in the financial report. If the environmental report is standardised, and the environmental financial information were integrated into the environmental reports, another important decision should be made: the presentation of the environmental reports cannot stay voluntary, it must be made mandatory. As I have explained, it is recommended to stipulate the reporting obligation based on the business entity’s activities and on its size.

V. CONCLUSION

The end-product of the environmental initiatives and environmental management accounting is

the environmental report. The end-product of the financial accounting is the financial statement (financial report), in which the presentation of environmental information occurs in a low quality and at a weight nor corresponding to its significance, due to the reasons partly identified in part II. In our days, environmental accounting may be fundamentally identified with environmental management accounting, which, on the one hand, is justified based on the peculiarities of the environment information. However, on the other hand, the problem is that no attempts are apparent to deepen and systemise the environmental information content of the financial statements, and with regards to environmental information the relation between the management and financial accounting is of low quality. The significance of the financial statements in the area of the presentation of environmental information may be (and have to be) increased by making the relation between the environmental management and financial accounting closer. To this effect, the strong and weak points of environmental management and financial accounting must be identified; connection points must be built on common and strong points, the weak areas must be developed, and, in my opinion, through the strengthening of the relation they induce development themselves.

The relation may be established from two directions: either we develop environmental financial accounting by building from environmental management accounting, and we make their relation closer this way, or we integrate the areas neglected in the environmental financial accounting into the content of environmental reports. The former would make it necessary to work out a separate Environmental Recognition and Measurement Rules and Disclosures in Financial Reporting standard, while the latter clearly requires the structure and content-related standardisation of the environmental report.

In my opinion, in the near future an international accounting and/or environmental professional organisation must inevitably undertake to channel the mass of the information of environmental reports and environmental financial statements prepared based on different guidelines towards ensuring transparency, systemisation and standardisation.

REFERENCES

[1.] Schaltegger, S.; Müller, K. & Hinrichsen, H. (1996):

Corporate Environmental Accounting. Chichester: John Wiley & Sons.

[2.] Kósi Kálmán – Valkó László (2006):

Környezetmenedzsment. Typotex Kiadó, Budapest, pp 94.

[3.] Definition of environmental management accounting and environmental financial accounting by EMARIC [4.] Vanessa Magness: Economic Values and Corporate

Financial Statements, pp 5., Environmental Management Vol. 32, No. 1, pp. 1–11 © 2003 Springer-Verlag New York Inc.

[5.] IAS 1. Presentation of Financial Statements, pharagraph 2, 7 [6.] .6 October 2007: Earth goes into the red ecologically, Notes

on Ecological Debt Day

[7.] IAS 1. Presentation of Financial Statements, pharagraph 2, 7.

[8.] International Guidance Document, Environmental Management Accounting, IFAC, August 2005, IFAC, Pages 76-81

[9.] C. Gregory Rogers: Environmental Disclosure Due Diligence: The Next Step in Environmental Due Diligence.

Busines Law Today, Volume 16, Nuber 5 May/June 2007.

[10.] Robert Dixon, Gehan A. Mosua, Anne Woodhead: The Role of Environmental Initiatives in Encouraging Companies to Engage in Environmental Reporting, European Management Journal Vol. 23, No. 6, pp. 702–716, December 2005 [11.] ABC of the main instruments of Corporate Social

Responsibility, pp 18., European Commission, Directorate- General for Employment and Social Affairs, 2004 [12.] Carty, P. Standard Sets Environmental Goals Accountancy,

1993 (May), 40–41.

[13.] http://ec.europa.eu/environment/emas/pdf/

5_5articles_en.pdf

[14.] GRI (2000). Sustainability Reporting

Guidelines.www.globalreporting.org., 2001 pp. 1-2, 22–36.

[15.] IASB, Framework for the Preparation and Presentation of Financial Statements, pharagraphs 22-46.

[16.] FEE: Towards a General Accepted Framework for Environmental Reporting, 2000 July, pp 28.and Skwarek Kristóf, Éri Vilma, Steve Brookes: Hogyan készítsünk környezeti jelentést?, Környezettudományi Központ, Budapest, 2002. június alapján

[17.] Robert Dixon, Gehan A. Mosua, Anne Woodhead: The Role of Environmental Initiatives in Encouraging Companies to Engage in Environmental Reporting, European Management Journal Vol. 23, No. 6, pp. 702–716, December 2005 [18.] 2003/51/EC Directive amending Directives

78/660/EEC,83/349/EEC, 86/635/EEC and 91/674/EEC on the annual and consolidated accounts of certain types of companies, banks and other financial institutions and insurance undertakings

[19.] 2001/453/EC: Commission Recommendation on the recognition, measurement and disclosure of environmental issues in the annual accounts and annual reports of companies of 30 May 2001 IASB, IAS 16 Property, Plant and Equipment, pha. 16. IASB, IAS 37 Provisions, contingent Liabilities and Contingent Assets, IFRIC, IFRIC 1: Changes in Existing Decommissioning Restoration and Similar Liabilities IFRIC, IFRIC 6 Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment FASB Statement No. 5, Accounting for Loss and Contingencies FASB Statement No. 143, Accounting for Asset Retirement Obligations, FASB Interpretation No. 47: Accounting for Conditional

AssetRetirement Obligations FASB Interpretation No. 157:

Fair Value Meausrements

[20.] SEC Regulation, S-K, tem s101, 103, 303.

[21.] ACCA, Industry as a partner for sustainable development, UK, 2002. pp 30-31.

[22.] 2003/51/EC Directive amending Directives 78/660/EEC, 83/349/EEC, 86/635/EEC and 91/674/EEC on the annual and consolidated accounts of certain types of companies, banks and other financial institutions and insurance undertakings, Article 1., phar. 14.

[23.] http://ec.europa.eu/environment/news/efe/eu_strategy /080619_emas_en.htm, The future of EMAS

[24.] IASB, Framework for the Preparation and Presentation of Financial Statements, pharagraphs 22-46. and GRI Útmutató a sustainabilityi jelentásekhez, Magyar nyelven, pp 9-10.