[CPEO-BIF] New FASB Rule - "Environmental Enron"?

[Lenny Siegel <lsiegel@cpeo.org>]

New FASB Rule Spurs Brownfield Spin-Offs, Write-Downs 
Disclosure Rules Presage "Environmental Enron"

By Michael T. Burr 
Inside Counsel
September, 2005

For many U.S. corporations, 2006 will be a year of reckoning. 

Financial Accounting Standards Board (FASB) Interpretation No. 47 (FIN
47) will take effect for the first time next year, forcing public
companies to recognize cleanup or disposal costs associated with
facilities or equipment being taken out of service. The rule change is
part of a broader regulatory trend toward requiring greater disclosure
of environmental liabilities. When combined with the provisions of
Sarbanes-Oxley, it will have a significant effect on some companies'
balance sheets. 

"Many people don't recognize how far reaching the changes are," says Jim
Redwine, a senior vice president with Shaw Environmental, a unit of the
Shaw Group engineering firm in Baton Rouge, La. "FIN 47 effectively
requires companies to go out and identify all of their asset-retirement
obligations. When they do that, some companies will carry disclosures
that won't be pretty."

Most directly affected are owners of real properties that will need to
undergo some kind of environmental cleanup in the future - such as
chemical-storage sites and power plants. Whether such properties are in
service, mothballed or being retired, FIN 47 clarifies that owners must
quantify and report the financial liabilities they represent as soon as
they arise. 

...

For the entire article, see
http://www.insidecounsel.com/issues/insidecounsel/15_166/regulatory/70-1.html

-- 


Lenny Siegel
Director, Center for Public Environmental Oversight
c/o PSC, 278-A Hope St., Mountain View, CA 94041
Voice: 650/961-8918 or 650/969-1545
Fax: 650/961-8918
<lsiegel@cpeo.org>
http://www.cpeo.org
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