Norwalk, CT, December 1, 2006—Reflecting its intention to ensure that costs and liabilities not specifically addressed by current governmental accounting standards are included in financial reports, the GASB today issued a standard that will require state and local governments to provide the public with better information about the financial impact of environmental cleanups.
To provide governments with better accounting guidance and consistency, GASB Statement 49, Accounting and Financial Reporting for Pollution Remediation Obligations, identifies the circumstances under which a governmental entity would be required to report a liability related to pollution remediation. According to the standard, a government would have to estimate its expected outlays for pollution remediation if it knows a site is polluted and any of the following recognition triggers occur:
Liabilities and expenses would be estimated using an "expected cash flows" measurement technique, which is used by environmental professionals but will be employed for the first time by governments. Statement 49 also will require governments to disclose information about their pollution obligations associated with clean up efforts in the notes to the financial statements.
"This standard improves financial reporting by promoting better, more transparent and comparable information brought about by clearer and consistent accounting," said Robert Attmore, Chairman of the GASB. "Statement 49 enhances the ability of financial statement users to assess a government's obligations by requiring both earlier reporting of liabilities's and recognition of liabilities that may not have been reported before."
Statement 49 will be effective for financial statements for periods beginning after December 15, 2007, but liabilities should be measured at the beginning of that period so that beginning net assets can be restated.
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.