Cost-Benefit Analysis Presentation

Cost-Benefit Analysisby Sherrie Dermit : 

Cost-Benefit Analysisby Sherrie Dermit

Slide 2: 

Corporate Executives are searching for analytical techniques that will take account of external costs and benefits such as pollution damage costs. Social programs are also governing the implementation of government programs and regulations.

Slide 3: 

Private Sector Organizations Support for government subsidy; grant or tariff. Estimate of impact of pollution on society. Valuation of employee time spent on public activities. Evaluation and allocation of resources to public projects or causes. Monitor mechanism for net corporate social contribution to society for the year and to date. Individuals Support for damage claims arising from loss of life, eyes, limbs, etc. Valuation of leisure time.

Slide 4: 

Public Sector Organizations Health programs. Education programs. Recreation facilities. Conservation projects (flood control dams, reservoirs.) Transportation improvement projects (airports, subways, tunnels, etc. Formulation of regulations for pollution control.

Shortfalls of Traditional Accounting Data : 

Shortfalls of Traditional Accounting Data It Focuses on past actions, which are not as relevant as future actions for decision making. It does not take into account external factors. It considers some resources to be free, or to have no cost. Its focus is far more narrow, relating almost always to shareholders interests, rather than stakeholders’ (or Society’s) interests.

Techniques of Cost-Benefit Analysis : 

Techniques of Cost-Benefit Analysis Instead for the normal revenue, expense, and net profit terminology. The new terminology would be benefits, costs, and excess of benefits over costs.

Present Value of Net costs or net benefit : 

Present Value of Net costs or net benefit

Shortcomings : 

Shortcomings Choices available to the preparer Constraints to be considered by the preparer and user Issues not resolvable by Cost-Benefit Analysis

Choices Available : 

Choices Available The preparer must make certain assumptions such as rate of discount and time. Opportunity cost has to be estimated Special interests of the groups making the Cost-Benefit Analysis decision. Bias

Constraints : 

Constraints Accepted projects must meet legal requirements. Budgetary constraints are sometimes removed

Unresolvable Issues : 

Unresolvable Issues Many issues cannot be fully resolved by Cost-Benefit Analysis Moral issues can be excluded or abstractly incorporated. Value judgments may not be handled to everyone’s satisfaction. Beauty is in the eye of the beholder.

Conclusion : 

Conclusion Traditional accounting will remain valuable, but in advanced societies, organizations must be aware and take account of their external impacts as well. Accountants should increase their understanding of Cost-Benefit Analysis and its pitfalls.