[CPEO-BIF] Accounting for "mothballed" property

[Lenny Siegel <lsiegel@cpeo.org>]

Accounting for Asset Retirement Obligations: New Accounting Rules May
"Clean Up" Contaminated Property

Sarah Campbell Smith
Holland & Knight ENVIRONMENT
Fourth Quarter,  2005


In the past, generally accepted accounting principles (GAAP) did not
require companies to report liabilities for environmental conditions,
such as contaminated facilities or buildings with asbestos-containing
materials, unless there was a pending or threatened legal proceeding
associated with the condition. Now, companies must account for
environmental legal obligations associated with their assets, even if
government enforcement or private litigation is considered unlikely to
occur. Under the new standard, companies that prepare audited financial
statements are required to report previously undisclosed environmental
liabilities when one can reasonably estimate the fair value of the
obligation. The brownfields redevelopment movement may benefit from this
reporting obligation if "mothballing" ? the practice of fencing-off
contaminated property indefinitely to delay or avoid cleanup costs ?
becomes a thing of the past. Indeed, companies may now decide to
remediate or sell previously mothballed properties to avoid disclosure
of these environmental liabilities in their financial statements. 

...

For the entire article, see http://www.hklaw.com/Publications/Newsletters.asp?IssueID=627&Article=3306

-- 


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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