Accounting Information Systems The

Crossroads of Accounting and IT 2nd

Edition Kay Solutions Manual
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ystems-the-crossroads-of-accounting-and-it-2nd-edition-kay-solutions-manual/
Active Review
8.1 Refer to the chapter opener, Meet the Triple Bottom Line. In your opinion, should companies be
required to report their performance using a triple bottom line?

The triple bottom line measures the economic, social, and environmental results of corporate
decisions. This is an attractive theory but it has proven challenging to measure in practice. The triple
bottom line approach results are short-term. These results that might appear favorable for all three
bottom lines might in fact be detrimental in the long run. Companies need a framework that offers the
short and long-term effects of decisions.

8.2 In today’s global market economy one could argue that implementing sustainability could cost
corporations enormous amounts of money, draining resources. So why is the corporate trend toward
including sustainability in business activities?

Implementing the sustainability may have an initial cost but in a long-term would prevent enormous
losses. Chapter 8 provides many examples of negative impacts of short-term-benefit oriented
decisions.

8.3 Discuss the importance of the criteria of transparency and effectiveness for a sustainability
framework.

The success of the sustainability framework is often based upon its effectiveness and transparency. It
is imperative that everyone has a common understanding of the sustainability performance
framework. An effective framework is simple and straightforward. Furthermore, the measurements
used to account for sustainability performance must be clearly articulated so that all can see what is
being used to measure the sustainability performance.

8.4 Some company sustainability reports indicate that it is not adequate to focus on only corporate social
responsibility (people). Discuss your opinion how social and environmental considerations are
interrelated. Do you think the three categories (economic, social, and environmental) are necessary
and adequate to address sustainability? Why or why not?

One of the keys to sustainability accounting is that sustainability accounting impact on people inside
and outside of the organization. See the Three Keys to Sustainability Accounting section in this
chapter.

8.5 Discuss why the future of financials might be nonfinancials.

Many of the factors impacting sustainability cannot be quantified in financial terms. Simply because a
factor cannot be quantified does not mean it should be eliminated from consideration. Ignoring
nonfinancial factors in the decision making process could lead to huge financial losses. Therefore,
more and more organizations are looking for models and frameworks to be able to include
nonfinancial factors in their decision making process.

8.6 Discuss how sustainability affects decision making.

Sustainability affects decision making by requiring a new decision making perspective. Sustainability
focuses on creating long-term value. Sustainability recognizes the interdependencies of economic,
social, and environmental factors in creating value. It offers a new approach to decision making in the
business environment, resulting in a dramatic shift in data requirements, data analysis, and decision
models.

8.7 Discuss the role of accounting systems and business intelligence in assisting organizations to improve
sustainability.

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 To store and retrieve data related to sustainability, additional tags or identifiers might be attached to
the data, such as XBRL tags. XBRL is used for accounting and financial reporting but it has the
potential to simplify accounting for sustainability. XBRL uses electronic tags for data, both
quantitative and qualitative. This is especially useful for sustainability accounting that involves
significant amounts of qualitative data. Furthermore, several providers of enterprise systems have
already responded with business intelligence tools for sustainability. Business intelligence tools, such
as Oracle Business Intelligence, provide graphical sustainability dashboards to monitor sustainability
patterns, trends, progress, and anomalies.

8.8 Discuss the role of XBRL in accounting for sustainability. In your opinion, how can XBRL facilitate
the organization’s sustainability measurements?

Already, there are XBRL taxonomies for sustainability reporting. XBRL adds electronic tags to
accounting and financial data. These electronic tags contain data about the data (metadata).
Furthermore, XBRL offers the ability to tag qualitative data in the sustainability report. This feature
permits users to search for specific economic, social, and environmental performance indicators, such
as carbon footprint, and then compare these among different organizations.

8.9 Discuss why the amount a company spends on social and environmental issues may not be the best
indicator or measure of its sustainability intelligence.

It depends how the amount was spent. Was it spent proactively or reactively? For example, consider a
company that donates money for wind farms creation. But the company doesn’t take any action to
reduce its carbon emissions. While the donations for the wind farms are commendable, the end result
is only carbon neutral. Sustainability intelligence is a proactive sustainability. Proactive application
considers the long-run sustainability and long-run consequences of the action. Reactivity is taking the
easiest short-run course of action to react to the current situation, rather than consideration of long-run
consequences of the action.

8.10 Discuss the future of the integrated reporting. In your discussion include your answers to the
questions put forward at the end of the Who’s a Leader in Integrated Reports? section.

To reflect the relationship between financial and nonfinancial performance, organizations began to
use the integrated reporting framework. This framework provides not only the essential context by
identifying an organization’s mission, major activities, markets, and products and/or services but also
an organization’s attitude to risk. That is why adopting and implementing the integrated reporting
framework is gaining momentum. For a deeper discussion on this issue visit: “Integrated reporting
gains steam with IIRC, IASB agreement” by Ken Tysiac, published on Feb. 8, 2013 in the Journal of
Accountancy. You can find this article at the following site:
http://www.journalofaccountancy.com/News/20137336.htm

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Key Terms Check
8.11 Match the following terms and definitions.

a. Triple bottom line c 1. Involves collecting, storing, organizing, and reporting

b. sustainability
c. sustainability accounting
d. green IT
e. e-cycling
f. sustainability Integrated Decision
analysis (IDa) model
g. global reporting initiative (GRI)
h. integrated reporting
economic, social, and environmental information for making
decisions and evaluating performance
g 2. Most widely used framework for sustainability performance
reporting
b 3. The ability to sustain an action in the future on an ongoing
basis
h 4. A report consists of financial and nonfinancial information
about a company’s economic, social, and environmental
performance
f 5. A framework for considering both qualitative and
quantitative economic, social, and environmental factors
a 6. Measures an organization’s performance in terms of
economic, social, and environmental results
e 7. Recycling of electronic equipment such as computers and
monitors
d 8. Environmentally friendly information technology equipment

Practice Test
8.12 Sustainability accounting means:
a. The ability to sustain future environmental risks
b. Including the air, water, and land pollution into the accounting
c. The ability to sustain an action in the future on an ongoing basis (Correct answer)
d. The ability to quantify, in dollar amount, the air, water, and land pollution

8.13 _________ measures the economics, social, and environmental results of corporate decisions.
a. Sustainability accounting
b. Corporate energy consumption
c. Corporate carbon accounting
d. Triple bottom line (Correct answer)

8.14 The three key to sustainability accounting are:

a. People, processes, and technology (Correct answer)
b. People, data, and processes
c. Sales, purchasing, and employee
d. Social, environmental, and economics

8.15 The sustainability IDa is the same as integrated decision model IDM, except:
a. It has four more steps
b. It includes the economics, environmental, and social dimensions into decision process. (Correct
answer)
c. It is designed for quick decision making
d. It is used for unsustainable decisions making

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8.16 Sustainability shifts the business focus to:
a. A holistic view of the business as an integral part of a larger system (Correct answer)
b. Viewing the business as an insignificant part of a larger system
c. The environmental impacts
d. Bottom line profit

8.17 One way to storing qualitative data is to

a. Track it in the spreadsheets
b. Ignoring it, qualitative data is not relevant to the sustainability decision making
c. Guess its financial value
d. Quantify it using numerical ranking (Correct answer)

8.18 Which method of creating value is best defined as strive for zero waste as opposed to reduced waste?
a. Redesign the product
b. Life cycle assessment model
c. Cradle-to-cradle model (Correct answer)
d. Redesign the processes and product

8.19 The_____________ family is a framework of guiding principles for establishing an environment

management system.
a. EMAS European Union
b. Sigma guideline
c. International Federation of accountants (IFAC)
d. ISO 14000 environmental management (Correct answer)

8.20 Which two criteria are used to evaluate frameworks for reporting and sustainability performance?
a. Effectiveness and efficiency
b. Transparency and effectiveness (Correct answer)
c. Consistency and Timeliness
d. Relevancy and accuracy

8.21 Which of the following is NOT one of the guiding principles for the proposed integrated reporting
framework?
a. Connectivity of information
b. Effectiveness, reliability, and relevancy (Correct answer)
c. Strategic focus
d. Future orientation

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Exercises
Short Exercises

8.22 Select a family member, friend, acquaintance, or complete stranger and explain the concept of
sustainability to him or her. Explain the interrelationships of sustainability and accounting. Evaluate your
effectiveness at explaining sustainability successfully. (Q8.1, 8.2, 8.3, 8.4)

Your explanation approach depends on your audience’s education and experience; however, it should
include the type of information you need for decision making and the difference between short-term and
log-term decisions.

8.23 How is qualitative sustainability data stored in a database? List at least three ways to store qualitative
data in a database with examples for each. (Q8.3)

• Labeling: using predefined labels for safety levels

• Ranking: using Likert scale of 1 to 5 to identify the safety level
• Estimate dollar amount: estimating safety aspect of an action in insurance dollar amount.

8.24 Choose three qualitative measures for sustainability and try to quantify them. Is it always possible to
quantify qualitative measures? Why or why not? Give an example to support your answer. (Q8.3)

It is not always possible to quantify qualitative data. We may enumerate them but we cannot perform
mathematical calculations on them and draw conclusions from the results. For example, to enumerate good
and bad we can say 1 represents good is 1 and 0 represents bad. However, the average of a good and bad
(1+0)/2 is ½, which doesn’t say how good or bad it is.

• Employee well-being
o Amount health insurance paid per employee

• Job Safety
o Number of employee job-related injuries in a year

• Toxic waste reduction

o Percentage of total money spent on organic fertilizer for enterprise natural environment.

8.25 Give two reasons that support the importance of the integrated reporting to the future of sustainability
reporting. You may use the Novo Nordisk integrated report that is included in this chapter extension.
(Q8.5, 8.6)
1. Integrated reporting doesn’t only show the relationships between an organization’s strategy,
governance and financial, social, and environmental performance and the economic context within
which the organization operates, but is also an integrator of sustainability into the organization’s
primary business.

2. Integrated reporting is offering a better alternative to existing frameworks. Organizations will see
integrated reporting as an opportunity to communicate about and implement a sustainable strategy.
It creates value for shareholders over the long term while contributing to a sustainable society.

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It’s Your Call

8.26 It is the first day of your new job as an accounting intern. In the elevator on the way to your cubicle, a
gentleman in the elevator (that you later learn is the controller of the company) says to you, “I just don’t get
it.” Shaking his head, he repeats, “I just don’t get it.” Then he adds, “Just how is sustainability relevant to
accounting? Don’t we have enough problems to keep track of instead of creating more problems to account
for?”
Unsure how to answer, you remain silent. So he continues, “You are our new intern, aren’t you?
Well, why don’t you send me an email by this afternoon explaining how sustainability is relevant to
accounting. Tell me why I should care about this latest trend, sustainability, and how it could affect our
accounting system.”
Prepare an email to the controller of the company to respond to his request. (Q8.1, 8.2, 8.3, 8.4)

In your email, explain that sustainability focuses on your organization’s ability to sustain an action in the
future on an ongoing basis. It provides answers for questions such as:
• Are your organization’s decisions and resulting actions sustainable in the long run?
• Is your organization’s performance sustainable in the long run?
You will state that sustainability would transform your organization from a business focused on bottom line
profit to one with a holistic view of the business as an integral part of a larger system. You conclude with
how the impacts of sustainability on accounting and how nonfinancial and financial sustainability data are
used in sustainability reports.

8.27 As CFO, you have been asked to evaluate the sustainability of two different enterprise software
systems for your company.
1. A system that uses an SAP baseline system. Your company would not customize the system but
would need to modify some of its business processes in order to adapt to the baseline system.
2. A system that customizes the SAP baseline system to fit your current business processes. You
would not need to modify your business processes.
Evaluate the sustainability of each system. Which system would you recommend your company adopt: the
baseline system or the customized system? Why? (Q8.2, 8.3)

You can use IDa to evaluate and analyze these two options. Consider the quantitative and qualitative
advantages and disadvantages of both approaches.

The second option could have only greater monetary impact since it requires SAP customization. Business
processes remain as they are.

The first option has a lesser monetary impact but could have social and environmental impact since there
are changes in the organization’s processes, policies, and rules. You have to analyze what long-term social
and/or environmental impacts these changes could bring. For example, changing a business process may
lead to layoffs because some activities would be automated.

There isn’t a specific answer to this question because we are not aware of the detailed nature of this
organization. However, the approach to the problem’s solution is clear.

8.28 Your supervisor has asked you to join him in a meeting about a possible change in the organization
reporting method. He says your organization is considering replacing several reports with an integrated
report. He wants you to prepare a presentation for him about the integrated reporting.
Prepare a summary and guideline for this presentation. In your work, state what an integrated
reporting model is, what types of reports are combined together in this report, and what are the benefits and
challenges. (Q8.5, 8.6)

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Integrated reporting categories: financial, social, and environmental performance.
Your presentation should include the following:
1. Explanation of why integrated reporting is so important to the future of a sustainable business
2. Comparison of a regular sustainability report with the integrated reporting
3. Opportunities and the challenges of integrated reporting

Tech in Practice
Tech Exercises

8.29
Tech Tool: Spreadsheet Software
Software Videos: Spreadsheet Data Tables, Spreadsheet PivotTables and PivotCharts
EspressoCoffee has asked for your assistance to build a sustainability dashboard.
1. Download the spreadsheet file for this exercise.
2. Use the data table to build a sustainability dashboard.
3. Print the dashboard.

EspressoCoffee is analyzing the use of organic coffee beans. The data file includes economic, environment,
and social qualitative data for this analysis.

See Tech Ex 8.29 Data File and Tech Ex 8.17 SOLUTION files in the Chapter 8 Exercises Solutions folder.

8.30
Tech Tool: Spreadsheet Software
Software Videos: Spreadsheet Data Tables, Spreadsheet PivotTables and PivotCharts
This exercise is a continuation of the sustainability decision model used in the chapter. The computer
manufacturer would like to add rankings to the qualitative factors that would affect the decision whether to
redesign computers or continue with the status quo.
1. Download the spreadsheet file for this exercise.
2. Update the spreadsheet data table by adding the following rankings for the qualitative factors in the
Amount column. The company will use a Likert scale of 1 to 5, with 5 as the most desirable ranking and 1
the least.

Rating Item
4 Reduce toxic waste
5 Employee well-being
4 Improved public relations
1 Toxic environmental waste
1 Toxic exposure (employee and community)
2 Expected increased healthcare costs

3. Create the following PivotTables and PivotCharts to use in the sustainability dashboard. Add these
PivotTables and PivotCharts to the Sustainability Dashboard sheet.
a. Option A Redesign, Quantitative, Sum Amount. This PivotTable and PivotChart will provide the
sum for economic, social, and environmental dimensions for option A.
b. Option A Redesign, Qualitative, Average Amount. This PivotTable and PivotChart will provide
the average for the Likert scale rating for economic, social, and environmental dimensions for
option A.
c. Option B Status Quo, Quantitative, Sum Amount. This PivotTable and PivotChart will provide the
sum for economic, social, and environmental dimensions for option B.

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 d. Option B Status Quo, Qualitative, Average Amount. This PivotTable and PivotChart will provide
the average for the Likert scale rating for economic, social, and environmental dimensions for
option B.

See Tech Ex 8.30 Data File and Tech Ex 8.18 SOLUTION files in the Chapter 8 Exercises Solutions folder.

8.31
Tech Tool: Spreadsheet Software
Software Videos: Spreadsheet Data Tables, Spreadsheet PivotTables and PivotCharts
1. Select two cars that you would consider purchasing, one of which is a hybrid or electric powered.
2. Using the sustainability IDa model and spreadsheet software, analyze the sustainability of each
option, including safety and environmental considerations.
3. Is there an external database you can use to assist you in making a more informed decision?
4. Make your decision regarding which car to purchase. Did your analysis change your thinking
regarding which car you would purchase?

There are many websites providing useful data about hybrid and traditional car advantages and
disadvantages. The sample solution is based on average data regarding electric and gas consumption and
car market price. This example shows that there are additional hidden costs associated with a hybrid car.
These costs are qualitative from the consumer side but are quantitative from the manufacturer side. One
example would be the cost associated with battery waste cleanup.

See Tech Ex 8.31 SOLUTION files in the Chapter 8 Exercises Solutions folder.

8.32
Tech Tool: Spreadsheet Software
The Nature Way Company is one of the leading companies in snack food market. Nature Way is
considering a sustainability strategy to produce and sell snacks to benefit consumers and environment.
Nature Way sustainability strategy would impact its potato chips product with the following policies:
• Use organic potatoes: Using organic fertilizer reduces the carbon footprint
• Use fuel-efficient farming equipment: This policy helps to reduce the carbon emission and fossil
fuel consumption.
• Use less salt in potato chips.
• Invest in advising and helping the Nature Way potatoes suppliers around the world with efficient
water consumption.
• Invest in well-being of Nature Way potatoes supplier around the world.
• Using healthy vegetable oil for making potato chips.
• Invest in consumer health benefit through advertisement for physical activities, health awareness
programs, and health club coupons.
• Use smaller bags to allow consumer to control better potato chip consumption

Develop a spreadsheet to document environmental, social, and economical impacts of the Nature Way
sustainability strategy policies.

See Tech Ex 8.32 SOLUTION files in the Chapter 8 Exercises Solutions folder.

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The following table shows environmental, social, and economical nature of the Nature Way policies.

1st Dimension 2nd Dimension

Policy Environmental Social Economic QT or QL

Organic Potatoes X QT
Fuel efficient Equipment X QT
Less Salt X QT
Water efficiency X QT
Investment in Supplier Awareness for Water efficiency X QT

Supplier Well Being X QL

Invest in Supplier Well being X QT
Supplier Well Being X QL
Using healthy Vegetable Oil X QT
Invest in Consumer Well Being X QT
Consumers Well Being X QL
Smaller Bag X QT

8.33
Tech Tool: Spreadsheet Software
Software Video: Spreadsheet Data table, Spreadsheet PivotTables, and PivotCharts
This exercise is a continuation of the preceding exercise.

Identify quantitative and qualitative factors of the Nature Way sustainability strategy policies and come up
with an estimate dollar value (credit or debit). Use your best guess for the dollar values.

Create a chart showing the profit or loss from these policies. Assume the Nature Way previous year potato
chips sales was $25,000,000 and analyst estimate because of these sustainability policies there will be an
increase of 10% in sales amount.

See Tech Ex 8.33 SOLUTION files in the Chapter 8 Exercises Solutions folder.

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The following tables and graph show Nature Way policies quantified. (Numbers are pure guess.)
Policy Environmental Social Economic QT or QL Cost/Benefit to Comments
Nature Way

Organic Potatoes X QT ($250,000.00)

Fuel efficient Equipment X QT $1,000,000.00
Less Salt X QT $150,000.00
Water efficiency X QT ($500,000.00)
Investment in Supplier X QT ($230,000.00)
Awareness for Water
efficiency

Supplier Well Being X QL

Invest in Supplier Well X QT ($730,000.00)
being
Supplier Well Being X QL
Using Healthy Vegetable Oil X QT ($1,200,000.00)
Invest in Consumer Well X QT ($100,000.00)
Being
Consumer Well Being X QL
Smaller Bag X QT ($120,000.00)
($1,980,000.00)
Increase in Sales $3,000,000.00
Net $1,020,000.00

Policy Cost/Benefit to NW
Consumer Well Being
Fuel efficient Equipment $1,000,000.00
Increase in Sales $3,000,000.00
Invest in Consumer Well Being ($100,000.00)
Invest in Supplier Well being ($730,000.00)
Investment in Supplier Awareness for Water efficiency ($230,000.00)
Less Salt $150,000.00
Organic Potatoes ($250,000.00)
Smaller Bag ($120,000.00)
Supplier Well Being
Using healthy Vegetable Oil ($1,200,000.00)
Water efficiency ($500,000.00)
Grand Total $1,020,000.00

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Go Online

8.34 The CFO is receiving more and more pressure from the board of directors and consumers to issue a
sustainability report. She has asked you to research examples of sustainability reports that are well done.
Go online and search for sustainability reports of two different companies that you think are good examples
to show the CFO. Compare and contrast the two reports. What aspects of the report would you recommend
that your company use for sustainability reporting?

Good examples are:

• Baxter sustainability report at:
http://sustainability.baxter.com/sustainability_reporting/gri_index.html
• UPS sustainability report at:
http://www.sustainability.ups.com/community/Static%20Files/sustainability/UPS_V27_0718_300
dpi_rgb.pdf

Both these companies use GRI approach. You can find their GRI indices at the end of their sustainability
reports.

8.35 The CFO has asked you why different companies often use different criteria to measure sustainability
performance. Go online and search for the sustainability reports of two corporations that use different
criteria to measure sustainability performance. Why do you think the two corporations have selected
different criteria?

You can use the site mentioned in the preceding question. UPS criteria are mostly about emission form fuel
consumptions by their different transportation fleet. The Baxter criteria are mostly about social and
environment biochemistry impacts.

8.36 Your organization would like to nurture vendor relationships with suppliers in developing geographic
regions to improve sustainability. Go online and search for examples of organizations that are using this
sustainability approach. Summarize your results to present to the president of the company.

A very good site regarding a vendor relationship with a supplier is:

http://www.akzonobel.com/sustainability/managing_sustainability/the_value_chain/sourcing/

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Students may find many other online sources on this topic.

8.37 You are starting a consulting service and believe that carbon accounting is one of the fastest-growing
areas of accounting. Go online and research carbon accounting and carbon accounting software packages.
Prepare a short summary of your findings that you can give to prospective clients.

Wikipedia could be used for both the definition of carbon accounting and software packages for carbon
accounting.

8.38 You are just hired in a consulting firm based in New York City. You job is to consult companies
located in Midwest on various reports including financial and sustainability reporting. Your firm wants you
to consult your clients on integrated reporting benefits. Go online and search benefits of integrated
reporting stated by Dr. Robert Eccles, one of the leaders in the integrated reporting field. Prepare a short
report in the Q/A format of findings that you can put in a PowerPoint presentation.

The following links include valuable information on integrated reporting, including its benefits and
challenges, as well as why organizations should consider integrated reporting framework.
1. http://www.triplepundit.com/2012/03/5-reasons-integrated-reporting-be-game-changer/
2. http://www.pwc.com/gx/en/corporate-reporting/integrated-reporting/why-integrated-reporting-is-
important.jhtml

Technology Projects
Technology Project 8
Tech Tool: Spreadsheet Software
Software Videos: Spreadsheet Data Tables, Database PivotTables and PivotCharts
iSportDesign would like to consider sustainability when making decisions and evaluating its performance.
Nick, the owner, has asked you to build a sustainability dashboard for him.

Your deliverables for the project include the following:

Deliverable 1. A sustainability data table for iSportDesign
Deliverable 2. A sustainability dashboard

Visit www.pearsonhighered.com/kay to do the following:

1. Download Technology Project 8 instructions.
2. Download files provided online for your convenience in completing the project deliverables.
3. Watch the videos with software instructions to complete this project at www.pearsonhighered.com/kay.

See Project Chapter 8 SOLUTION file in the Chapter 8 Exercises Solutions.

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