Accounting for liabilities related to ecosystem degradation

Abstract

Introduction:A growing belief that accounting can and should play a role in halting andreversing degradation of ecosystems is leading to conceptual and methodological develop-ments that recognize the cost of degradation, attribute the cost to the entities responsibleand assure that entities can’t ignore the economic burden associated with it.Outcome:Demonstration accounts prepared around a scenario where agricultural use ofland includes an obligation to maintain ecosystem condition. The accounts are compliant and coherent with both the international accounting standards for individual entities and the United Nations’System of Environmental-Economic Accounting.Discussion:Accounting for liabilities for ecosystem degradation demonstrates that, where theliability reflects the lost economic value of the ecosystem, the accounts communicate a reductionin the total net worth of the economy and a redistribution of net worth away from the partyresponsible for the degradation. The inclusion of both liabilities for degradation and the cost ofdegradation does not lead to double-counting the economic impact of degradation.Conclusion:Accounting principles and frameworks encourage greater accountability for entitiesresponsible for ecosystem condition by providing greater visibility of the economic cost toindividual entities, governments and nations Show more