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Contingent Environmental Liabilities: Disclosures and Accounting (Portfolio 5136)

Portfolio 5136-2nd, Contingent Environmental Liabilities: Disclosures and Accounting, explains how to account for and disclose contingent environmental liabilities.

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DESCRIPTION

Portfolio 5136-2nd, Contingent Environmental Liabilities: Disclosures and Accounting, explains how to account for and disclose contingent environmental liabilities. Accounting for environmental liabilities is increasingly important in an era of heightened scrutiny, a rise in socially responsible investing, and demands by stakeholders for increased transparency.
This Portfolio reviews applicable laws and regulations; analyzes the risks associated with the failure to account for and effectively disclose environmental liabilities (e.g., civil litigation, criminal charges, and damage to investor relations); and presents examples of corporate practices regarding accounting for and disclosing environmental liabilities. The Portfolio has been designed as a reference source for accountants tasked with accounting for and disclosing contingent environmental liabilities.
This Portfolio may be cited as BNA Tax and Accounting Portfolio 5136-2nd, Evers, Smith, Brown, and Drake, Contingent Environmental Liabilities: Disclosures and Accounting (Accounting Policy and Practice Series).
Note: Various FASB documents, copyrighted by the Financial Accounting Standards Board, 401 Merritt 7, P.O. Box 5116, Norwalk, CT 06858-5116, U.S.A., are reprinted with permission.


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AUTHORS

PAMELA S. EVERS, J.D.
Pamela S. Evers, LL.M., Environmental Law, Northwestern School of Law of Lewis & Clark University; J.D., Southern Methodist University; M.B.A., Emory University. Ms. Evers practices law in Texas and the District of Columbia. She also teaches in the Department of Accountancy and Business Law at the University of North Carolina Wilmington.

L. MURPHY SMITH, CPA, D.B.A.
L. Murphy Smith, D.B.A., Louisiana Tech University; M.B.A., University of Louisiana at Monroe; B.B.A., University of Louisiana at Monroe (summa cum laude). Dr. Smith has worked as an auditor with an international accounting firm. He frequently has consulted as an expert witness on accounting and auditing issues, and teaches Accounting at Texas A&M University.

DARRELL BROWN, PH.D.
Darrell Brown, Ph.D., Accounting, University of Utah; M.B.A., University of Montana; B.S., Forestry, University of Montana. Dr. Brown teaches Accounting at Portland State University.

MICHAEL DRAKE, CPA
Michael Drake is an accounting doctoral scholar at Texas A&M University. Prior to entering the doctoral program, he worked at an international public accounting firm.

TABLE OF CONTENTS

Detailed Analysis

I. Introduction and Scope

Introductory Material

A. Definition of a Contingent Environmental Liability

B. Examples of Contingent Environmental Liabilities

C. Disclosure of Contingent Environmental Liabilities

D. Scope of the Portfolio

II. Legal and Regulatory Framework for Accounting and Disclosing Contingent Environmental Liabilities

Introductory Material

A. Accounting and Financial Reporting

1. Federal Legislation

2. Financial Accounting Standards Board (FASB)

3. Internal Revenue Service (IRS)

4. Securities and Exchange Commission (SEC)

5. American Institute of Certified Public Accountants (AICPA)

6. Environmental Protection Agency (EPA)

7. ASTM International

B. Regulatory Framework and Guidance for Managing and Disclosing Environmental Impacts

1. In General

2. Federal Legislation and Agency Enforcement

3. State Legislation

4. Non-Governmental Guidance for Environmental Impacts

a. ISO14001:2004 Environmental Management Standard

b. International Association for Impact Assessment (IAIA) Publications

c. United Nations Publications

III. Economic Costs of Non-Compliance With Regulatory Scheme 53

Introductory Material

A. Criminal Litigation Report

B. Civil Litigation Report

IV. Methods of Accounting and Reporting Contingent Environmental Liabilities

A. Interrelated Concepts

B. Scope and Definition of Environmental Accounting

C. Environmental Accounting in Practice

D. The GRI Sustainability Reporting Guidelines

1. Background

2. Overview of the GRI Sustainability Reporting Guidelines

3. Reporting Principles

4. The Transparency Imperative

5. Principles of Report Content

6. Principles of Report Quality

7. Standard Disclosures in a GRI Report

V. Social Equity, Environmental Stewardship and Economic Vitality: The Triple Bottom Line

A. Framework

B. Evaluation

C. Examples

D. Summary

VI. Corporate Environmental Reporting

Introductory Material

A. Who Reports

B. Why Report

C. What to Report

D. Sustainability Context

E. Assurance Services

F. Assurance Providers

VII. Key Laws, Regulations, and Standards

A. Applicable Laws and Regulations Per SOP 96-1

1. Superfund

2. Resource Conservation and Recovery Act of 1976

3. Clean Air and Clean Water Acts

4. Emergency Planning and Community-Right-to-Know Act

5. Toxic Substances Control Act

B. Review of Accounting Professional Standards

1. Statements of Financial Accounting Standards (SFAS) No. 5: Accounting for Contingencies

2. FASB Interpretation (FIN) No. 14: Reasonable Estimation of the Amount of a Loss

3. EITF 90-8: Capitalization of Costs to Treat Environmental Contamination

4. AICPA Statement of Position (SOP) 94-6: Disclosure of Certain Significant Risks and Uncertainties

5. SOP 96-1. Environmental Remediation Liabilities

C. ISO 14000 Standards

D. The GAO Environmental Disclosure Report

E. Review of Accounting Research Literature

VIII. Examples of Environmental Disclosures

Introductory Material

A. ChevronTexaco Corp

B. DuPont

C. Williams Company

D. British Petroleum

E. Praxair Inc.

F. The Proctor & Gamble Company

G. Bristol-Myers Squibb Company

H. Colgate-Palmolive Company

IX. Conclusion

Working Papers


WORKING PAPERS

TABLE OF WORKSHEETS

Worksheet 1 Glossary

Worksheet 2 Definitions of Liabilities From the FASB, IASB, and Certain of the IASB's National Standard Setter Partners

Worksheet 3 Framework of Federal Environmental Regulation

Worksheet 4 States Authorized to Administer the National Pollutant Discharge Elimination System of the Clean Water Act

Worksheet 5 States Authorized to Administer the National Pollutant Discharge Elimination System of the Clean Air Act

Worksheet 6 The ISO 14000 Model

Worksheet 7 Examples of Environmental Costs Incurred by Firms

Worksheet 8 Summary of GRI Performance Indicators*

Worksheet 9 The GRI Family of Documents

Worksheet 10 Comparison of Reporting Concepts: Global Reporting Initiative (GRI) With the Accounting From the Financial Accounting Standards Board of the United States (FASB) and the International Accounting Standards Board (IASB)

Worksheet 11 Novo Nordisk, 2003 TBL Statements

Worksheet 12 Wessex Water Environmental Cost Statement Showing Conversion of Environmental Impacts to Monetary Units

Worksheet 13 Corporate Responsibility Reports, by Type (adapted from KPMG International Survey of Corporate Responsibility Reporting 2005)

Worksheet 14 Percentage of Reporters, by Country (adapted from KPMG International Survey of Corporate Responsibility Reporting 2005)

Worksheet 15 Percentage of Reporters, by Industrial Sector (adapted from KPMG International Survey of Corporate Responsibility Reporting 2005)

Worksheet 16 Percentage of Corporations Identifying Drivers for Corporate Responsibility (adapted from KPMG International Survey of Corporate Responsibility Reporting 2005)

Worksheet 17 Examples of Environmental Disclosures by Selected Companies

Worksheet 18 List of Relevant Statutes

Worksheet 19 FASB Statement of Financial Accounting Standards No. 5, Accounting for Contingencies

Worksheet 20 FASB Interpretation No. 14 (as Amended): Reasonable Estimation of the Amount of a Loss

Worksheet 21 EITF Issue No. 90-8: Capitalization of Costs to Treat Environmental Contamination

Worksheet 22 AICPA SOP 94-6: Disclosure of Certain Significant Risks and Uncertainties

Worksheet 23 AICPA SOP 96-1: Environmental Remediation Liabilities

Worksheet 24 Staff Accounting Bulletin No. 92: Accounting and Disclosures Relating to Loss Contingencies

Worksheet 25 List of Significant Accounting Pronouncements Principally Discussed

Bibliography

OFFICIAL

Statutes:

Securities and Exchange Commission:

Rules and Regulations

SEC Staff Accounting Bulletins

Federal and State Court Cases:

UNOFFICIAL

American Institute of Certified Public Accountants:

AICPA Statements of Position

Emerging Issues Task Force:

Financial Accounting Standards Board:

FASB Concepts Statements

FASB Interpretations

FASB Statements of Financial Accounting Standards

FASB Staff Positions

Books, Non-Governmental Organization Publications, and Legislative Materials

Journal Articles

Working Papers

Magazines, Periodicals, and Presentations

Annotated List of Internet Materials