NEWS RELEASE 03/25/05
Governmental Accounting Standards Board Issues Preliminary Views on Issues Related to Accounting and Financial Reporting for Pollution Remediation Obligations
Norwalk, CT, March 25, 2005—The Governmental Accounting Standards Board (GASB) has released a Preliminary Views (PV) document, Accounting and Financial Reporting for Pollution Remediation Obligations, that highlights the Board’s preliminary views concerning accounting and financial reporting standards for pollution remediation obligations, which are obligations to address the current or potential detrimental effects of existing pollution by participating in pollution remediation activities such as site assessments and cleanups.
The PV proposes that, once any one of five specified obligating events occurs, governments would be required to estimate the components of expected pollution remediation outlays using an “expected cash flow” measurement technique, and determine whether outlays for those components should be accrued as a liability or, in limited instances, capitalized when goods and services are acquired.
Most pollution remediation outlays would be accrued as a liability and expenditure or expense, as appropriate, when a range of expected outlays is reasonably estimable. If a government cannot reasonably estimate the range of all components of the liability, it would recognize the liability as the ranges of each component (for example, legal services, site investigation, or required postremediation monitoring) become reasonably estimable. The PV proposes a series of recognition benchmarks—steps in the remediation process—that governments should consider in determining when the components of pollution remediation liabilities are reasonably estimable.
The provisions of the PV would be applied retroactively. Provisions for an effective date will be provided if and when the PV is issued as an Exposure Draft.
"The provisions in this PV fill a gap in the accounting guidance for state and local governments,” said Wesley Galloway, manager of the pollution remediation obligations project. “If adopted, these provisions will result in pollution remediation liabilities’ being reported more completely and consistently.”
The GASB encourages interested individuals and organizations to comment on its proposals through written response. The deadline for submitting comments is June 24, 2005, followed by a public hearing in San Antonio, Texas, on June 29. Additional information about submitting a response or a request to speak at the hearing is included in the Preliminary Views document, which is available on the GASB’s website at www.gasb.org.
About the Governmental Accounting Standards Board
The GASB is the independent, not-for-profit organization formed in 1984 that establishes and improves financial accounting and reporting standards for state and local governments. Its seven members are drawn from the Board's diverse constituency, including preparers and auditors of government financial statements, users of those statements and members of the academic community. More information about the GASB can be found at its website www.gasb.org.