ENVIRONMENTAL FINANCIAL REPORT

The following environmental cost reports for 2005, 2006, and 2007 are for the Communications Products Division of Kartel, a telecommunications company. In 2005, Kartel committed itself to a continuous environmental improvement program, which was implemented throughout the company.

Environmental Activity	2005	2006	2007
Disposing hazardous waste	$200,000	$150,000	$ 50,000
Measuring contaminant releases	10,000	100,000	70,000
Releasing air contaminants	500,000	400,000	250,000
Producing scrap (nonhazardous)	175,000	150,000	125,000
Operating pollution equipment	260,000	200,000	130,000
Designing processes and products	50,000	300,000	100,000
Using energy	180,000	162,000	144,000
Training employees (environmental)	10,000	20,000	40,000
Remediation (cleanup)	400,000	300,000	190,000
Inspecting processes	0	100,000	80,000

At the beginning of 2007, Kartel began a new program of recycling nonhazardous scrap. The effort produced recycling income totaling $25,000. The marketing vice president and the environmental manager estimated that sales revenue had increased by $200,000 per year since 2005 because of an improved public image relative to environmental performance. The company’s finance department also estimated that Kartel saved $80,000 in 2007 because of reduced finance and insurance costs, all attributable to improved environmental performance. All reductions in environmental costs from 2005 to 2007 are attributable to improvement efforts. Furthermore, any reductions represent ongoing savings.

Required:

1. Prepare an environmental financial statement for 2007 (for the Products Division). In the cost section, classify environmental costs by category (prevention, detection, etc.).

2. Evaluate the changes in environmental performance.