Current Developments

FASB Amends Statement 141R

On April 1, 2009, the Financial Accounting Standards Board (FASB) issued FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies.  Under intense pressure from reporting entities, attorneys, and auditors, the FASB fully retreated from its efforts to apply fair value measurement to contingencies.  As amended, FAS 141(R) represents no meaningful change from the contingency provisions in the original FAS 141.  As before, contingencies assumed in a business combination shall be recognized at fair value if the acquisition-date fair value of the contingency can be "determined" during the measurement period.  The amendment provides no guidance on when the fair value of a contingency can be "determined". 

SEC Releases Proposed IFRS Roadmap

On November 14, 2008, the SEC released its long-awaited proposed roadmap for transitioning to International Financial Reporting Standards (IFRS). Under the SEC's proposed timeline, all publicly traded U.S. companies would be required to use IFRS within six years if the SEC votes in 2011 to push its plan forward. However, at least 110 companies could use the international rules as early as next year, depending on their size and their industry. 

FASB Sidesteps Fair Value of Litigation

At its board meeting on October 29, 2008, the Financial Accounting Standards Board (FASB) responded to concerns about fair value measurement of pending and unasserted litigation by proposing to modify the loss contingency provisions in FASB Statement 141R, Business Combinations (FAS 141R).  FAS 141R, which becomes effective December 15, 2008, requires loss contingencies assumed by an acquiring entity in a business combination to recognize a liability at its acquisition date fair value if certain criteria are met.  As issued, FAS 141R would have required many pending and unasserted claims to recorded at fair value.  More...

Bailout Package Extends Brownfields Tax Incentive

Section 318 (Expensing of Environmental Remediation Costs) of H.R. 1424 signed into law last Friday extends the deadline for Section 198 of the Internal Revenue Code through December 31, 2009, effective for expenditures paid or incurred after December 31, 2007.  Section 198 allows taxpayers to receive a current federal income tax deduction for certain qualifying remediation costs that would otherwise by subject to capitalization.  The extension is a timely benefit for companies seeking to acquire or dispose of environmentally impaired properties.

New Disclosures Proposed for Contingent Liabilities

On June 5, 2008, FASB released for public comment Proposed Statement of Financial Accounting Standards, Disclosure of Certain Loss Contingencies.  The proposed standard would significantly expand the quantitative and qualitative disclosure requirements for loss contingencies under SFAS 5 and 141(R). The proposed standard would be effective for fiscal years ending after December 15, 2008, and interim and annual periods in subsequent fiscal years.

Climate Risk Disclosure

On September 18, 2007, a broad coalition of investors, state officials with regulatory and fiscal management responsibilities, and environmental groups filed a petition asking the Securities and Exchange Commission (SEC) to require publicly-traded companies to assess and fully disclose their financial risks from climate change.  A June 12 letter updates the original petition with (a) legislative, regulatory, and litigation developments concerning climate change, greenhouse gas regulation, energy policy and financial disclosures relating to climate change, and (b) important reports and studies which indicate the need for improved disclosure.

Senators Call for SEC Guidance on Climate Risk Disclosure

Senator Chris Dodd, D-Conn., Chairman of the Senate Committee on Banking, Housing and Urban Affairs, and Senator Jack Reed, D-R.I., Chairman of the Subcommittee on Securities, Insurance and Investment, wrote to Securities and Exchange Commission Chairman Chris Cox on December 6, 2007 urging the SEC to issue guidance on climate disclosure requirements.  Download letter to SEC.

FASB Proposes Deadline Extension for Fair Value Measurement

The Financial Accounting Standards Board (FASB) has issued a proposed FASB Staff Position (FSP) that would delay the effective date of FASB Statement No. 157, Fair Value Measurements, for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Among other things, the extension would apply to asset retirement obligations (AROs). Individuals and organizations can submit written comments on the proposed FSP by January 16, 2008 to File Reference: Proposed FSP FAS 157-b.  Download proposed FSP.

New Auditing Standard to Increase Environmental Scrutiny

Statement of Auditing Standard No. 109, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement, issued July 2007 and effective for audits of financial statements for periods beginning on or after December 15, 2006, is causing auditors of private companies to focus greater attention on environmental risks and liabilities.

The standard requires auditors to obtain an understanding of relevant industry, regulatory, and other external factors. These factors include, among other matters, "environmental requirements affecting the industry and the entity."  Contingent liability for environmental remediation is listed as an example of conditions and events that may indicate the existence of risks of material misstatement. 

FASB Extends Deadline for Fair Value Measurement of Nonfinancial Assets and Liabilities

Financial Accounting Standards Board (FASB) Statement 157, which provides standards for the application of fair value measurement, became effective November 15, 2007, at least in part. At its November 14, 2007 Board meeting, the FASB agreed to a one year deferral for the implementation of Statement 157 for nonfinancial assets and liabilities, such as environmental indemnities and AROs. The FASB will issue an exposure draft for comment in the near future on this partial deferral.  Read more...

FASB Issues New Rule Requiring Fair Value Measurement of Contingent Liabilities in Business Combinations

On Tuesday, December 4, the FASB issued FAS 141-R, Business Combinations, The new standard will require, among other things, fair value measurement of certain contingent liabilities (including many environmental cleanup liabilities) assumed in a M&A transaction.  FAS 141-R will take effect for fiscal years beginning after December 15, 2008.   Read more ...

U.S. Senate Securities, Insurance, and Investment Committee Holds Hearing on Climate Disclosure

On October 31, 2007, the U.S. Senate Committee on Securities, Insurance, and Investment held a hearing titled, "Climate Disclosure: Measuring Financial Risks."  Jeff Smith, past Chairman of the ABA Environmental Disclosure Committee, and  Mindy Lubber, President, Ceres, among others provided testimony.  More info...  

FASB Holds Firm on Deadline for Fair Value Measurement

FASB Statement 157, which provides standards for the application of fair value measurement, is set to become effective November 15, 2007. Arguing that internal accounting teams, valuation experts, and external auditors need more time to grasp the many aspects of the standard, the Institute of Management Accountants and Financial Executives International recently petitioned the FASB to postpone the effective date of Statement 157, to give companies a one-year break. In denying the request for extension at its October 17, 2007 meeting, the FASB questioned whether companies lack the resources to comply in a timely manner, and suggested that instead of delaying implementation, corporate managers were in fact hoping to avoid implementation altogether by re-opening the rulemaking. Read more...

Chevron reports new AROs

Chevron, which previously has claimed that it could not estimate AROs for its refining, marketing, transportation, and chemical assets due to indeterminate retirement dates, recently announced an estimated $700 million in nonrecurring net charges in the third quarter of 2007 for “asset impairments, environmental remediation provisions, income tax adjustments, asset retirement obligations, and severance provisions.?The company has not yet provided detailed disclosures on the nature of these charges.  Read more ...

New York Subpoenas 5 Energy Companies

Attorney General Andrew M. Cuomo of New York recently subpoenaed five large energy companies, AES Corporation, Dominion, Dynegy, Peabody Energy and Xcel Energy, questioning whether their plans to build coal-fired power plants pose undisclosed financial risks that their investors should know about pursuant to state securities law Read more from the New York Times.

Investors Petition SEC for Guidance on Climate Risk Disclosure

On September 18, 2007, a broad coalition of investors, state officials with regulatory and fiscal management responsibilities, and environmental groups filed a petition asking the Securities and Exchange Commission (SEC) to require publicly-traded companies to assess and fully disclose their financial risks from climate change.

New Study on Effect of FIN 47

Researchers find that recent laws and regulations for reporting environmental liabilities are having a profound impact on business environmental managers.  Read more...

Public Company Accounting Oversight Board Proposes New Standard for Auditing Internal Control Over Financial Reporting

The proposed standard would supersede PCAOB Auditing Standard No. 2, and is designed to focus the auditor on the matters most important to internal control, eliminate unnecessary procedures, simplify and shorten the standard by reducing detail and specificity, and make the audit more scalable for smaller and less complex companies.

Summary | Proposed Standard

SEC Votes to Propose Interpretive Guidance for Management to Improve Sarbanes-Oxley 404 Implementation

The proposed principles-based guidance issued Dec. 20, 2006 is  organized around two important principles:

  • First, management should evaluate the design of the controls that it has implemented to determine whether there is a reasonable possibility that a material misstatement in the financial statements would not be prevented or detected in a timely manner.
  • Second, management should gather and analyze evidence about the operation of the controls being evaluated based on its assessment of the risk associated with those controls.

The proposed rule notes that significant accounting estimates and critical accounting policies -- both characteristic of environmental liabilities -- present a higher risk of material misstatements and control failures.  See pp. 33-34.

Press Release | Proposed Rule

SEC Extends SOX 404 Deadline for Smaller Companies

On Dec. 15, 2006, the SEC once again postponed for one year the date by which smaller public companies must comply with the internal control reporting requirements mandated by Section 404 of Sarbanes-Oxley.  The new compliance date will apply to annual reports for fiscal years ending on or after December 15, 2007.  Final Rule

GASB Issues Final Standard on Accounting for Pollution Remediation Obligations

On December 1, the Governmental Accounting Standards Board (GASB) issued a standard that will require state and local governments to provide the public with better information about the financial impact of environmental cleanup obligations.

Governments will now be required to report a liability for pollution remediation obligations if it knows a site is polluted and any of the following recognition triggers occur:

  1. Pollution poses an imminent danger to the public or environment and a government has little or no discretion to avoid fixing the problem
  2. A government has violated a pollution prevention-related permit
  3. A regulator has identified (or evidence indicates it will identify) a government as responsible (or potentially responsible) for cleaning up pollution, or for paying all or some of the cost of the cleanup
  4. A government is named (or evidence indicates that it will be named) in a lawsuit to compel it to address the pollution
  5. A government begins or legally obligates itself to begin cleanup or post-cleanup activities (limited to amounts the government is legally required to complete).

Liabilities must be estimated using an expected value measurement technique.

Press Release | Fact Sheet

Ashland Settles with SEC

On November 29, the Securities and Exchange Commission issued a settled administrative cease-and-desist order against Ashland Inc., a Fortune 500 chemical company incorporated in Kentucky, and William C. Olasin, a current Ashland employee, in connection with misstatements of Ashland's environmental reserve.

Without admitting or denying the findings, Ashland consented to the Commission's Order finding that the company violated Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder, and requiring that Ashland cease and desist from committing or causing any such violations and future violations. Ashland also consented to a number of undertakings, including the strengthening of its internal controls for determining its environmental reserve, and the retention of both its independent auditor and an outside firm to review its policies, procedures, and internal controls for determining its environmental reserve and for soliciting and investigating internal complaints, including measures to prevent retaliation against complainants. Without admitting or denying the findings, Olasin consented to the Commission's Order finding that he caused Ashland's violations and also violated Exchange Act Rule 13b2-1, and requiring that Olasin cease and desist from committing or causing any such violations and future violations. (Rel. 34-54830; AAE Rel. No. 2518; File No. 3-12487)

Read more ...

Report Examines Environmental Disclosures of FTSE All-Share Companies Under UK Directive

Trucost and the Environment Agency report on the environmental disclosures of FTSE All-Share under the requirements of the European Union Accounts Modernisation Directive. 

The research carried out by Trucost is a follow up report to the environmental disclosures of FTSE All-Share companies study published by the Environment Agency in 2004 and reveals that although there has been a small increase, with 96 percent of the companies referring to some aspect of the environment in 2006, compared to 89 percent in 2004, the reporting is of low quality and little use to investors.

Press Release | Full Report

EDR Launches Online Service to Support Environmental Financial Reporting

Environmental Data Resources (EDR) recently launched EDR OnDemand, an online, subscription service that allows real-time aggregation of and access to environmental information from more than 800 federal, state, local, and tribal sources. Clients can now conduct research that previously took days in a matter of minutes.

EDR OnDemand can assist corporations and their attorneys through the first, and potentially most challenging, step in complying with FIN 47 ?the identification and inventorying of environmental conditions that may need to be accounted for as asset retirement obligations (AROs) on their financial statements. Examples of the types of potential AROs that companies can locate through EDR OnDemand include: financial assurance records, underground storage tanks, historical spills, the presence of RCRA-permitted hazardous waste management units, solid waste management units, and other reported environmental conditions at the company’s facilities.  Read more...

FASB Issues Standard on Fair Value Measurement

On September 15, 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard No. 157, Fair Value Measurements. The new accounting statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. FAS 157 applies under other accounting pronouncements that require or permit fair value measurements, including statements relevant to financial reporting of environmental liabilities such as FAS 141-R, FAS 143, FAS 144, FIN 45, and FIN 47. The new FASB pronouncement does not require any new fair value measurements. However, for some entities, its application will change current practice. [Full Text] (Excludes Appendix E) (Appendix E—Amendments to APB and FASB Pronouncements will be posted to the FASB website on or before September 21, 2006) [Summary]

The Brattle Group Conducts Survey on Environmental and Product Liability Disclosure

The Brattle Group's web-based survey benchmarks current attitudes, practices, challenges, and trends relating to environmental and product liability estimation and disclosure. Download a summary of the survey, which focuses on the extent to which companies disclose liabilities, define what is “material,?and are aware of recent and proposed changes in disclosure standards, guidance, and procedures.

COSO Releases Internal Control Guidance for Smaller Companies

On July 11, 2006, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) released its highly anticipated guidance titled Internal Control over Financial Reporting—Guidance for Smaller Public Companies.  Download (English) the free executive summary.

$1 Trillion of Investors Call on SEC to Require Corporate Disclosure on Financial Risks of Climate Change

On June 15, 2006, more than two-dozen institutional investors, managing more than $1 trillion of assets, called on the U.S. Securities and Exchange Commission (SEC) to require publicly-traded companies to disclose the financial risks of global warming in their securities filings.  Read more...

GAO Reports Control Weaknesses in Accounting for U.S. Environmental Liabilities

In a March 2006 report, entitled Environmental Liabilities: Long-Term Fiscal Planning Hampered Control Weaknesses and Uncertainties in the Federal Government’s Estimates, the U.S. Government Accountability Office reports that the Department of Defense's "outdated and incomplete accounting guidance for developing and reporting its environmental liability estimates led to errors in financial reporting; its policies and procedures for determining, reporting, and documenting environmental liability estimates were not consistently followed; and none of the military services had adequate controls in place to help ensure that all identified contaminated sites were included in their environmental liability cost estimates. These weaknesses not only affected the reliability of Defense’s environmental liability estimate, but also that of the federal government as a whole."  Download the full report.

FIN 47 Webinar

On May 31, 2006, RTM Communications is hosting a webinar on "Practical Business Strategies for Dealing with the New FASB Standards for Reporting Environmental Liabilities".  Learn more...

Ashland Inc. Announces Possible SEC Civil Action for Environmental Remediation Reserves

On April 25, 2006, SEC staff notified Ashland of the staff's intent to seek authorization to pursue a civil action against Ashland relating to adjustments that reduced the company's environmental remediation reserves for 1999 and 2000. Read more...

Chapman & Cutler Law Firm Says FIN 47 Presents Reporting Risks for Lawyers

"Both private and in-house counsel working on compliance with FIN 47 should pay particular attention to the potential impacts such liability estimates may have with respect to collateral claims, litigation, and enforcement actions involving potentially responsible parties, governmental entities, shareholders, buyers and sellers, etc. Moreover, counsel should be very familiar with the requirements of the ABA’s “Statement of Policy Regarding Lawyer’s Responses to Auditor’s Request for Information?and the attorney reporting requirements of Section 307 of the Sarbanes- Oxley Act and the implementing SEC regulations, which impose duties upon attorneys to independently evaluate the need and advisability of public disclosure of information, to advise clients, and to take certain additional steps if the client disregards the advice provided."  Read more...

Reed Smith Law Firm Says, "Complying with FIN 47 could have serious impacts on the corporate balance sheet."

Reed Smith LLP is among the 20-largest U.S.-based law firms with 1,000 attorneys practicing in 18 offices throughout the United States, the United Kingdom, Germany and France. Read more...

Ceres Releases First-Ever Ranking of 100 Global Companies on Climate Change Strategy

The 2006 Corporate Governance and Climate Change: Making the Connection report ranks 76 U.S. companies and 24 non-U.S. companies in 10 business sectors based upon, among other things, disclosures of climate change risks, opportunities, and response measures in securities filings and sustainability reports.

Download: Summary Report

Download: Full Text

Asarco Leaves Legal Heartburn

Asarco's creditors will try to convince a federal bankruptcy judge in Texas that Grupo Mexico “systematically cannibalized?Asarco since buying it six years ago and should be ordered to help cover its debts, which reportedly include more than $1 billion to clean up environmental contamination at 94 sites in 21 states. In addition, more than 85,000 asbestos exposure-related claims worth an estimated $500 million have been filed against Asarco, and more are expected. Read more...

FIN 47 Delays 10-K Filings

Petroleum Development Corporation (PDC), the managing general partner of publicly-traded limited partnerships, delayed the filing of Form 10-Ks for various limited partnerships for the year ended December 31, 2005. The delay was due to, among other things, identified accounting errors related to accounting for asset retirement obligations. Read more...

Covenant Transport, Inc.delayed the filing of its Form 10-K for the year ended December 31, 2005.  Covenant and its independent registered public accounting firm were unable to complete their review of the impact of FIN 47 on Covenant's financial statements. Read more...

Ultralife Batteries, Inc. delayed the filing of its Form 10-K for the year ended December 31, 2005 to finalize its analysis of the impact to its financial statements related to the adoption of FIN 47. Read more...

Westmoreland Coal Company delayed the filing of its Form 10-K for the year ended December 31, 2005 so that management and the company's independent auditors can complete their assessment of the company's internal control over financial reporting relating in part to accounting for mine reclamation costs under FAS 143. Read more...

Carmike Cinemas, Inc. delayed the filing of its Form 10-K for the year ended December 31, 2005 due to the need to complete additional research required to analyze technical accounting issues relating largely to FASB Interpretation No. 47.  Read more...

RTM Contaminated Property Transactions Conference Features FIN 47

Greg Rogers is participating in RTM Communications, Inc.'s Conference on Contaminated Property Transactions: Deal Making and Redevelopments in Washington, D.C., March 29 - 31, 2006.  Click through for more information on RTM or a conference brochure.

Powell Goldstein Comments on FIN 47

Law firm Powell Goldstein says, "The new FIN 47 will have a significant impact on the way in which companies must report their conditional asset retirement obligations, particularly those arising from environmental assets."  Accounting For Environmental Liabilities Under The New Financial Interpretation Number ("FIN") 47, by Joan Sasine and Chris Thompson, February 21, 2006.

RMT Sees FIN 47 as Top Issue for 2006

Global, full-service engineering and environmental management consulting firm.RMT says FIN 47 may create an incentive to develop asset management strategies, resulting in the ultimate removal of those sites from the company’s financial statements.  Read more.

Foley & Lardner Comments on "Normal Operations"  Criterion under FAS 143

In its February 2006 Information Bulletin, law firm Foley & Lardner concludes that "environmental damage caused by leaks, spills, or any other release that is not an intended or "proper" part of the operation of an asset, are not subject to [FIN 47]."  Read more.

EDR Launches FIN 47 Initiative

Environmental Data Resources, Inc. (EDR), a national provider of current and historical environmental risk information, announced December 15, 2005 that it is launching an initiative to help companies identify conditional asset retirement obligations.  Read more.

FASB Developing Staff Position on AROs

The Financial Accounting Standards Board staff is drafting a proposed FASB Staff Position (FSP) that will provide guidance on how to account for the change in the estimated fair value of an asset retirement obligation that results from a change in foreign currency exchange rates when the ARO is denominated in a currency other than the functional currency. The staff will discuss the proposed FSP at the January 18, 2006 Board meeting. Click here for more information.

Financial Assurance to be an Enforcement Priority for EPA in 2006

EPA's Office of Enforcement and Compliance Assurance (OECA) has added financial assurance as a priority for the FY2006 planning cycle and will develop an implementation strategy. OECA's determination is described in the attached document, entitled "Final FY2006 Update, National Program Managers?Guidance, Office of Enforcement and Compliance Assurance, June 2005."

Following is the detailed explanation (included on pp. 3-4 of the guidance document) regarding the rationale for selecting financial assurance as a priority and OECA's approach to for addressing this area. Note that the guidance document preceded the recent report by the U.S. Government Accountability Office (highlights attached).

Selection Rationale: Financial responsibility protects public health and the environment by promoting the proper and safe handling of hazardous materials and protecting against a liable party defaulting on closure or clean up obligations. These benefits are lost unless there is compliance with the financial responsibility requirements and enforcement where there is a failure to maintain sufficient financial responsibility. Absent financial assurance, protection of human health and the environment would depend on available governmental financial resources. Consistent with EPA’s mandate to protect human health and the environment and ensure compliance with the law, as well as the Agency’s long standing "polluter pays" principle, an enforcement strategy for obtaining full compliance with financial responsibility requirements prevents improper handling of hazardous materials and the shifting of the costs from the responsible parties to state and federal taxpayers.

Recent events have revealed that there are significant issues related to compliance with the financial responsibility obligations under current environmental laws. OECA is concerned that entities not providing adequate financial responsibility in accordance with their obligations under federal laws are not providing adequate protection to human health and the environment. OECA’s concerns in this area are shared by the Association of State Territorial Solid Waste Management Organizations (ASTSWMO) who urged OECA to adopt financial responsibility as an FY2006-2007 enforcement priority.

EPA has decided to phase in its approach in the examination of compliance and enforcement issues under the federal laws. OECA has initiated its review by looking at the Resource Conservation and Recovery Act (RCRA) Subtitle C closure/post-closure and corrective action and the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). OECA plans to initiate its review of Section 6(e) under the Toxics Substance and Control Act (TSCA) in FY2006. Also in FY2006, OECA plans to evaluate the Safe Drinking Water Act (SDWA) and RCRA Subtitle I to determine if the financial responsibility programs under these laws should be included in this priority. This phased approach will help OECA refine its efforts to address identified non-compliance and resource issues as well as help in the development of a strategy with measurable goals and outputs for all environmental laws requiring financial responsibility in this priority.

Performance-Based Strategy Goal: By FY2007, reduce harm to human health and the environment by addressing noncompliance and optimize EPA’s financial protection and resources. EPA is currently developing procedures and measures to carry out this goal by creating a screening process to assess risks caused by a failure to have financial responsibility so that high-risk entities are identified on a priority basis and ensuring that all inspected entities are in compliance or on a path to compliance.

IFAC Issues Guidance on Environmental Management Accounting

The International Federation of Accountants (IFAC) has issued new guidance on environmental management accounting (EMA). The document, commissioned by IFAC and supported by the Division for Sustainable Development of the United Nations Department of Economic and Social Affairs (DSD/UNDESA), recognizes the increasing importance of environmental issues and the difficulty of managing these issues.

The guidance is aimed primarily at professional accountants within organizations, but IFAC says it will also be of interest to professional accountants and auditors who are becoming more involved in tracking or verifying environment-related information in financial and other reports.

The objective of the guidance document is to reduce confusion and provide a framework and set of definitions that is comprehensive, yet as consistent as possible with other existing environmental accounting frameworks with which EMA must coexist.

For more information, download the IFAC press release and the EMA Guidance Document.

Accounting for Emissions Allowances

Citing the increasing international use (or planned use) of schemes designed to achieve reduction of greenhouse gases through the use of tradable permits, the International Accounting Standards Board voted at its September 2005 meeting to begin work on writing new rules on accounting for pollution emission allowances.

The announcement follows the IASB’s decision In July to formally withdraw guidance on emissions allowances, known as IFRIC 3 Emission Rights, developed by the International Financial Reporting Interpretations Committee. The IASB noted that there was a risk of diverse accounting practices for emission trading schemes following the withdrawal of IFRIC 3 and that this would impair the comparability and usefulness of financial statement information. The new rulemaking process will enable the IASB to address the underlying accounting in a more comprehensive way than originally envisaged by the IFRIC.

Currently, there is no standard for emission allowances under U.S. accounting principles, and the Financial Accounting Standards Board (FASB) has not announced plans to develop such a standard.

For more information, see the IASB’s July 2005 summary on the withdrawal of IFRIC 3 and its September 2005 meeting summary regarding Emissions Trading.

404 Deadline Extension

The SEC voted on September 21, 2005 to extend for an additional one year the Sarbanes-Oxley Section 404 compliance deadline for small public companies (non-accelerated filers). Under the new compliance schedule, a company that is not an accelerated filer will need to comply with the Section 404 internal control requirements for its first fiscal year ending on or after July 15, 2007. 

As justification for the deadline extension, the SEC pointed to ongoing efforts by the Committee of Sponsoring Organizations of the Treadway Commission to develop an enhanced COSO Framework for smaller public companies, and the continuing evaluation of the impact of the internal control requirements on smaller public companies by the SEC Advisory Committee on Smaller Public Companies.

Click here for more information. 

ASTM Standards

The ASTM task force for standards E 2137 (environmental cost estimation) and E 2173 (environmental disclosure) will meet to initiate review of these standards on October 19, 2005 in Dallas, Texas.  The meeting is scheduled for 1:00 pm to 4:00 pm at the Hyatt Regency Hotel, 300 Reunion Blvd, Dallas, Texas, Room 357, 3rd floor.

Proposed topics include:

  • The impact of Sarbanes-Oxley on E 2173
  • The impact of FASB's proposals on fair value measurements
  • The impact of FASB Interpretation No. 47 (an interpretation of FASB Standard No. 143) on accounting for asset retirement obligations
  • Reactions to SEC's review of the standards based on the Rose Foundation's proposal for adoption
  • The impact of GAO's 2004 report
  • Update on reporting of insurance coverage
  • Update on use of the standards and issues raised by users

The meeting is open to non-ASTM members. Persons interested in attending who are not registered ASTM members should RSVP to Dan Smith at ASTM (email: to ensure adequate space and seating for all attendees.  Interested persons are invited to submit comments and ideas for other agenda topics to Gayle Koch (email:

Accounting for Business Combinations 

On June 30, 2005, the Financial Accounting Standards Board (FASB) issued an Exposure Draft for a proposed new standard for accounting for business combinations. The new accounting standard would have significant implications for the recognition and measurement of environmental liabilities assumed in mergers and acquisitions.

If adopted in its current form, the new standard would require, subject to limited exceptions, that assets acquired and liabilities assumed in business combinations be measured and recognized at their fair values as of the acquisition date. Of special relevance to environmental liabilities, the new standard would eliminate the FASB Statement No. 5, Accounting for Contingencies, approach to recognizing contingencies. For more information, click here.

Fair Value Measurement

On June 23, 2004, the Financial Accounting Standards Board (FASB) issued an Exposure Draft for a new accounting standard on fair value measurement (FVM). The new standard will define fair value and establish a framework for applying the FVM objective under generally accepted accounting principles (GAAP). The new standard will be especially relevant to measurement of environmental asset retirement obligations and environmental liabilities assumed in business combinations. FASB has stated its intention to issue a final FVM Statement in the 4th quarter 2005.

The FVM Statement will focus on "how" to measure fair value, not "what" to measure at fair value. What must be measured at FVM will continue to be determined under other authoritative accounting pronouncements such as FASB Statement No. 143, Accounting for Asset Retirement Obligations (FAS 143), FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, and proposed FASB Statement 141-R, Accounting for Business Combinations.

The FVM Statement will supersede and amend the limited FVM guidance in several existing pronouncements, including FAS 143. Changes to current FVM practice resulting from the application of the new FVM Statement will relate principally to the processes and methods for measuring fair value and expanded disclosure requirements.

For more information, click here.

Environmental Liabilities: EPA Should Do More to Ensure That Liable Parties Meet Their Cleanup Obligations

A new U.S. Government Accountability Office (GAO) report says that EPA should do more to ensure that liable parties meet their cleanup obligations under CERCLA and RCRA. The release of the GAO's report coincides with news releases that Asarco, which recently filed for bankruptcy, could be liable for more than $1 billion in cleanup costs at more than 30 sites nationwide.

One of the GAO's recommendations is that EPA implement a 1980 statutory mandate under Superfund to require businesses handling hazardous substances to demonstrate their ability to pay for potential environmental cleanups—that is, to provide financial assurances. EPA has cited competing priorities and lack of funds as reasons for not implementing this mandate, but GAO found that EPA's inaction has exposed the Superfund program and U.S. taxpayers to potentially enormous cleanup costs at gold, lead, and other mining sites and at other industrial operations, such as metal-plating businesses.

The GAO report, entitled "Environmental Liabilities: EPA Should Do More to Ensure That Liable Parties Meet Their Cleanup Obligations, GAO-05-658," August 17, 2005 is available on the GAO's web site. Full Report Abstract Highlights-PDF

Chemical Company Announces Environmental Restatement

in February 2005, Millennium Chemicals Inc. restated its financial statements for the three-year period ended December 31, 2003 and the first three quarters of 2004 to recognize an increase of $52 million in its recorded liabilities for environmental remediation.

The errors corrected by the restatement were the result of failure to increase the probable liabilities for future remediation spending related to past environmental contamination when the reasonably estimable amounts of such probable future spending increased. Millennium reported that the errors were attributable to a material weakness in internal control over financial reporting relating to the recording by Millennium of the probable liabilities related to contingencies, including environmental remediation obligations.

The material weakness consisted of (1) inadequate procedures to verify the appropriateness of period-end balances of recorded liabilities reflecting Millennium’s best estimate of probable future spending associated with contingent liabilities and (2) ineffective communication among the corporate functions with knowledge and accountability relating to environmental remediation, legal contingencies, accounting, and disclosure

Millennium is a global chemical company, with total 2004 revenues of $1.9 billion, and assets of $2.5 billion as of December 31, 2004. On November 30, 2004, Lyondell Chemical Company acquired Millennium in a stock-for-stock business combination. As a result of the business combination, Millennium is now a wholly owned subsidiary of Lyondell.  Millennium’s financial statements were audited by PricewaterhouseCoopers LLP. 

Read the entire Section 9A of Millennium’s Form 10-K filed March 16, 2005.


FASB Issues Exposure Draft on Disclosure of Certain Loss Contingencies

Norwalk, CT, June 5, 2008—The Financial Accounting Standards Board (FASB) today issued an Exposure Draft (ED) of a proposed Statement of Financial Accounting Standards, Disclosure of Certain Loss Contingencies—an amendment of FASB Statements No. 5 and 141(R). The proposed Statement would be effective for fiscal years ending after December 15, 2008, and interim and annual periods in subsequent fiscal years.




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