MANAGEMENT ACCOUNTING

KP Y
CASE ANALYSIS
“PT. SWASTISIDDHI AMAGRA”

GROUP 2
Gita Sirini Purwanto 130417003
Felicia S. Yaury 130417008
Inggono 130416005
 Statement of Authorship

We hereby confirm that we are the sole author of the paper presented. We are aware of the
lecturer's regulations concerning plagiarism, including those regulations concerning disciplinary
actions that may result from plagiarism. We confirm that this work is submitted in order to fulfill
the weekly assignment in Management Accounting subject, and has not been submitted
elsewhere in any other form for the fulfillment for any other subject requirement.

Surabaya, March 27th 2019

____________________ ____________________
Gita Sirini P. Felicia S. Yaury
130417003 130417008
____________________
Inggono
130416005
 CHAPTER 1
THEORY

1.1 Environmental Costs

Environmental costs are costs that are incurred because poor environmental quality may
exist. Thus, environmental costs are associated with the creation, detection, remediation, and
prevention of environmental degradation. With this definition, environmental costs can be
classified into four categories: prevention costs, detection costs, internal failure costs, and
external failure costs. External failure costs can be subdivided into realized and unrealized
categories.
Environmental prevention costs are the costs of activities carried out to prevent the
production of contaminants and/or waste that could cause damage to the environment. Examples
of prevention activities such as evaluating and selecting suppliers, training employees, recycling
products, and obtaining ISO 14001 certification.
Environmental detection costs are the costs of activities executed to determine if
products, processes, and other activities within the firm are in compliance with appropriate
environmental standards. The environmental standards and procedures that a firm seeks to follow
are defined in three ways: (1) regulatory laws of governments, (2) voluntary standards (ISO
14001), and (3) environmental policies developed by management. Examples of detection costs
include inspecting products and activities, auditing environmental activities, and measuring
levels of contamination.
Environmental internal failure costs are costs of activities performed because
contaminants and waste have been produced but not discharged into the environment. Internal
failure activities have one of two goals: (1) to ensure that the contaminants and waste produced
are not released to the environment or (2) to reduce the level of contaminants released to an
amount that complies with environmental standards. Example of internal failure costs such as
maintaining pollution equipment, treating and disposing of toxic materials, and recycling scrap.
Environmental external failure costs are costs of activities performed after discharging
contaminants and waste into the environment. Realized external failure costs are those incurred
and paid for by the firm. Unrealized external failure costs (societal costs) are caused by the firm
but are incurred and paid for by parties outside the firm. Example of realized external failure
activities are cleaning up oil spills, cleaning up a polluted lake, and cleaning up contaminated
soil. And, example of societal costs such as losing a lake for recreational use because of polluted
air (individual welfare), and losing a lake for recreational use because of contamination
(degradation).
1.2 Environmental Cost Report
Environmental cost reporting is important if an organization is serious about improving
its environmental performance and controlling environmental costs. A good first step is a report
that details the environmental costs by category. Thamus discovered that reporting
environmental costs by category revealed two important outcomes: (1) the impact of
environmental costs on firm profitability and (2) the relative amounts expended in each category.
1.3 Reducing Environmental Costs
Environmental failure costs can be reduced by investing more in prevention and detection
activities. It is possible that the environmental cost reduction model will behave in a very similar
way to the total quality cost model. Perhaps the lowest environmental costs are attainable at the
zero-damage point, much like the zero-defects point of the total quality cost model. The idea
underlying the zero-damage view is that “prevention is cheaper than the cure.”
 CHAPTER 2
COMPANY PROFILE & CASE ANALYSIS

2.1 Company Profile

PT. Swastisiddhi Amagra is engaged in oil palm plantations located in Pekanbaru. This
company produces palm oil. This company was established in early 1992, initially the company
was engaged in the processing and export business of Vanilla. Before being a limited liability
company, this company is a trading business under the name UD. Vanilla AG, which started its
activities since 1986. The company developed quite rapidly, starting from the export of hundreds
of kilos of vanilla to more than 40,000 kg in 1993
In 1994 vanilla production dropped dramatically because vanilla plants were infected by
stem rot. Various ways have been done to overcome this stem rot disease, but this stem rot
disease still cannot be dealt with, so farmers shift their agricultural activities to other plants.
Seeing vanilla production is declining due to external factors (plant / natural conditions) that
cannot be controlled by the company, so Mr. Soebarkat Pranoto, the owner of the company, took
the initiative to shift his business to oil palm.
In 1996, he started to open more than 400 hectares of oil palm plantations in Riau. He
sees the prospect of palm oil will continue to grow in the coming decade, because he has been
involved in the palm oil industry for a long time.
In 1997 Mr. Soebarkat Pranoto also opened an oil palm plantation area of 454.5 hectares.
Planting was carried out in stages which began in 1997 with an area of 178 ha, in 2003 it was
planted with an area of 187 hectares, and planting in the final stage, in 2005 covering an area of
89.5 hectares. Production continues to increase with time
Recently, PT. Swastisiddhi Amagra obtained a location permit to open oil palm
plantations in the Mentawai Islands covering 34,000 hectares. It is estimated that in early 2016,
after the permits needed to clear the Mentawai land were completed, PT. Swastisiddhi Amagra
will immediately carry out the land clearing activities. Planning for land clearing will be done in
stages.
2.2 Case Analysis
The application of environmental accounting needs to be done as a corporate
responsibility with the community affected by environmental pollution due to the waste of
production from the company. PT Swastisiddhi Amagra’s operating activities tend to generate a
lot of waste, where the production process creates liquid and solid waste in producing palm oil.
In 2011 there was an event which resulted in a loss to PT Swatisiddhi Amagra, namely the
occurrence of a waste leak which resulted in the death of a fish that is considered as God by the
surrounding community. This happens because the pool used to collect liquid waste from palm
oil production has leaked. Therefore, since 2011, PT. Swastisiddhi Amagra has collaborated with
a Korean company that engaged in the energy sector to process this waste. With this
collaboration, the company’s liquid waste can be safely dispose to the river and it also can be
used as electricity that can be reused by the company. The increasing environmental activities
carried out by the company made PT Swastisiddhi Amagra decide to implement environmental
accounting in preparing financial statements since 2011.

Classification and Environmental Cost Report

Cost Percentage 2010
Activities Costs Percentage per
category

Prevention Cost

Jamsostek Cost Rp 184.239.200,00

Employee Safety Cost Rp 45.000.000,00

Excavator Rent Cost Rp 150.000.000,00

Road Repair Cost Rp 100.000.000,00

TOTAL Prevention Cost Rp 479.239.200,00 93%

Detection Cost

Leasing Excavator Experts Rp 24.000.000,00

 Testing Feasibility of Liquid Waste Cost Rp 6.000.000,00

Checking Air Measurement Cost Rp 6.000.000,00

TOTAL Detection Cost Rp 36.000.000,00 7%

Internal Failure Cost

TOTAL Internal Failure Cost

External Failure Cost

TOTAL External Failure Cost

TOTAL Environmental Cost Rp 515.239.200,00 100%

Source : Data Processed

Classification and Environmental Cost Report

Cost Percentage 2011
Activities Costs Percentage per
category

Prevention Cost

Jamsostek Cost Rp 184.239.200,00

Employee Safety Cost Rp 45.000.000,00

Excavator Rent Cost Rp 150.000.000,00

Concrete Cost Rp 700.000.000,00

Road Repair Cost Rp 100.000.000,00

TOTAL Prevention Cost Rp 1.179.239.200,00 81%

Detection Cost

Leasing Excavator Experts Rp 24.000.000,00

Testing Feasibility of Liquid Waste Cost Rp 6.000.000,00

Checking Air Measurement Cost Rp 6.000.000,00

 TOTAL Detection Cost Rp 36.000.000,00 2%

Internal Failure Cost

TOTAL Internal Failure Cost

External Failure Cost

Responsibility of Environmental Pollution Rp 250.000.000,00

TOTAL External Failure Cost Rp 250.000.000,00 17%

TOTAL Environmental Cost Rp 1.215.239.200,00 100%

Source : Data Processed

From the two tables, the biggest cost from both years are the prevention cost, with 2010
at 93% and 2011 at 81%. The detection cost from 2010 is 7%, while for 2011 the detection cost
decreases to 2% and have internal failure cost at 17%. We can conclude that in 2010, the
company has contributed well to environmental performance as shown by the percentage of
environmental costs, namely prevention costs which are far greater than the costs of internal
failure and external failure. While for 2011, the company has contributed well to the
environmental performance but the company has experienced an external failure problem,
namely the existence of environmental pollution, liquid waste leakage which allows the company
to pay fees to compensate for the pollution amounting to Rp 250.000.000,00. But overall the
company’s environmental is quite good, if it is shown from the results of the percentage of
environmental costs, namely prevention costs which are far greater than the costs of internal
failure and external failure.
From the managerial side, our group thinks that PT Swastisiddhi Amagra is very good,
because they realize what is their failure and are willing to compensate for their mistakes. They
also take a quick action to work with Korean company to fix the mistakes, and at the end their
mistakes can be turned into something useful that the company and environment can use.
 CHAPTER 3
CONCLUSION AND SUGGESTION

3.1. Conclusion
Due to the lack of awareness and anticipation of the company, the company suffered
considerable losses. When the company was still producing vanilla, the company did not
anticipate that a disaster would occur that would cause the company to incur a large loss.
In 1996 the company was engaged in oil palm plantations, but the company still had not
estimated the losses that would be experienced due to the leakage of the waste tanks they
disposed of. They also do not take into account the environmental costs they have to bear due to
this leakage.
This company has realized that environmental damage resulting from the waste produced
will affect their profitability. This company has contributed well in maintaining the surrounding
environment by working with Korean companies to address the waste they produce. Even so, the
company is still involved with the problem of external failure, namely environmental pollution
that occurred before the collaboration with a Korean company.

3.2. Suggestion
The company still has to detect whether the same incident will happen again or not, the
company must anticipate the worst due to environmental destruction or environmental pollution.
Companies must report environmental costs so that companies know whether the products they
produce have a good or bad effect on the environment in order to protect the surrounding
environment. Companies also have to invest in prevention and detection activities. Because oil
palm companies produce a lot of waste, whether it is liquid waste or solid waste.
 REFERENCES

Chapter 17: Environmental Cost Management

https://studylibid.com​/
http://repository.uksw.edu/