IFAC

Physical Environmental Management Accounting(PEMA)

reasons:
1. energy usage, water,materials, and generation of waste are directly related to environmental
impacts of organizations
2. material purchase cost are key cost driver to organizations.
Physical accounting information collected under EMA is key to the development of many environmentrelated costs
Accountants need to work more closely with personnel from other departments to accurately do
the physical accounting side of EMA
An organization should account all physical inputs and outputs and make sure that no
significant amounts of energy, materials, water are unaccounted for. It is called materials
balance,input-output balance,mass balance, or Eco-balance.
The details for materials flows must be traced through all the different organizational materials
management steps. Also referred to as materials flow accounting
material inputs include energy, water, other material that enter an organization. Output includes
products, wastes, other materials that leave the organization. Any output that is not a product output is
called as Non-Product Output(NPO). Named on the document as waste and Emission.
Inputs and Outputs do not include capital items because they do not enter or exit the
organization with the same frequency or volume as the other physical materials
Materials Input
raw and auxiliary materials- material input that will become the organization's output or byproduct. Raw materials are the major product component while auxiliary materials are the
organization's minor product component.
Packaging materials- material inputs intended for use in shipping an organization's final
product.
Merchandise- material inputs that are purchased with view to be sold again. Tend to have a
fewer environmental impact and environment related costs than with other material input.
Operating materials- material input that organization purchases and use but do not become part
of the physical product delivered to the customer. Become a NPO
Water- includes all water the organization use. Usually like Operating Materials but separately
categorized because it is particularly important from an environmental perspective and
accounting system often mange water flow information differently form other material flow
information.
Energy- includes all Energy the organization use. Same with Water
Material Output
Products- major physical product produced during the manufacturing process that the
organization intend to sell.
By-product- minor product incidentally produced during the manufacturing process.
Non-Product Output(Waste & Emission)- any output that is not a product output. Includes solid
waste, hazardous waste, wastewater and air emission. Solid waste is relatively non-hazardous
waste in solid form. Hazardous waste is hazardous waste material in solid form. Wastewater is

waste stream that is composed of water and contaminants. Air emission are air streams
contaminated with problematic level of pollutants.
Monetary Information
goal is to clarify the type of environment-related cost information that managers need to
manage
Cost categories for discussion of EMA
Category 1- Materials Costs of Product Outputs
-It includes the purchase costs of Material Inputs that are converted into products, byproducts and packaging.
-These cost data help an organization to cost effectively manage the materials-related
environmental impacts of its products.
Category 2 Materials costs of Non-Product Output
-It includes the purchase costs of Material Inputs converted into NPOs.
-Assessment of these costs allows managers to better assess the potential monetary value
of preventive environmental management.
Category 3 Waste and Emission Control Costs
-covers the costs of handling, treating, and disposing of the Waste and Emissions; Remediation and
compensation cost for environmental damages.
Category 4 Prevention and Other Environmental Management Costs
covers the cost of preventive environmental management activities, cost for
environmental planning and system, environmental measurement, environmental
communication, and other relevant costs.
Category 5 Research and Development Costs
includes costs of Research and Development activities on environment-related issues
and initiatives.
Category 6 Less Tangible Costs
- covers internal and external less tangible(difficult-to-quantify) costs that are potentially
significant. It includes liabilities, future regulation, productivity, image and stakeholder r
egulation, and externalities.