The Relevance of Environmental Cost Classification and Financial Reporting: A Review of Standards

Abstract

Oil prospecting companies and host communities in Nigeria has been having series of conflicts in the past decade. The complaint is always firms not meeting up with their environmental responsibilities generated through the negative production externalities. This study takes a critical evaluation of some aspects of IAS and selected companies’ financial statement to see the level of companies’ response to such responsibilities as reflected in the financial statements. Using a content analysis, the researchers discovered that firms report their environmental cost with no specific classification of to enable them report in the either the income statement or the statement of financial position. The result is that firms only give a descriptive disclosure of environmental cost with no monetary value in the chairman’s or director’s report. The researchers recommended that cost should be reported in the income statement if it is not intensive, otherwise it should be reported in the statement of financial position.

Keywords: Relevance, Environment, Cost, Classification, Financial Reporting and Standards.