Assessing environmental risk; financial statement users are carefully scrutinizing the adequacy of environmental cleanup disclosures.

Summary

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A company's environmental liability must be disclosed to shareholders in its financial statement. SEC environmental disclosure requirements must also be met. Financial Accounting Standards Board (FASB) Statement no. 5 explains the concept of 'loss contingency' used to assess the company's environmental risk. Financial concerns include funds for statutory compliance, possible hazardous substance liability in lawsuits and fines for environmental law violations and cleanup costs.

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Assessing environmental risk; financial statement users are carefully scrutinizing the adequacy of environmental cleanup disclosures.

Faced with myriad potential sources of financial exposure from ever-increasing environmental regulation, companies are grappling with the substance and timing of shareholder disclosures about the effect of environmental laws and regulations. Equally challenged, financial statement auditors must assess whether environmental issues have beet) considered properly before reporting a company's statements are presented in accordance with generally accepted accounting principles. This article will help accountants and auditors assess the sources of a public or private company's financial risk and the adequacy of presentation or disclosure of environmental matters in financial statements.

STATUTORY SOURCES OF ENVIROMMENTAL LIABILITY

Companies are subject to a wide range of federal, state and local environmental laws and regulations. Major federal statutes include the Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery Act of 1976 (RCRA), the Comp...

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