Circular Economy and Financial Accounting
Circular Economy and Financial Accounting

Author(s): Aida Mosko
Subject(s): Social Sciences
Published by: Udruženje ekonomista i menadžera Balkana
Summary/Abstract: Financial accounting has an important role in managing financial information in the circulating economy. The transition from a linear economy to a circular economy requires innovation in all parts of the life cycle of materials and various challenges related to proper and effective financial accounting. At the core of this economic model is the development of a sustainable process throughout the life cycle of products, from production to the final stage. Through finance and accounting, the business has the ability to keep track of its financial health and reliability and also drive the transaction towards the circular economy. The accounting and reporting techniques designed for the linear economy are not the right ones to represent the value of circular businesses. Accounting must analyse and report to all relevant stakeholders of a company on financial and non-financial performance and enable them to understand the value and impact of the circular economy. To achieve this goal, our current way of doing business must change, and accounting has a major role to play in that. This paper aims first to identify and analyse the main financial accounting challenges related to the circular economy and also to draw attention to the importance of redefining value, impact and risk to advance the circular transition and expand business opportunities.

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