As executive and legislative initiatives focus more on environmental protection, accounting rules have also been changing to achieve more transparency in terms of how companies treat and estimate environmental liabilities. Many questions arise: How will different industries now need to account for their practices? Will they have to spend higher for environmental expenses? Will this impact market capitalization? What can you do to increase transparency, conform to current standards, and alleviate risks?
This webcast produced by The Knowledge Group, will discuss how common accounting problems relate to environmental issues and how FAS 5: Accounting for Contingencies, can be applied to regulating environmental liabilities. This event will provide critical, timely updates and should be considered a must-attend event for anyone interested in Accounting for Contingencies and Environmental Liabilities issues. The regulations affect companies of all sizes. This event is highly recommended for companies who have any environmental risk exposure and for companies that may be involved in M&A activity in the near future.
Course Level: Intermediate
Prerequisite: None
Method Of Presentation: Group-Based-Internet
Developer: The Knowledge Conference
Recommended CLE/CPE Hours: 2.0
(Please note, your State Bar or Accounting Board will make the final determination with respect
to continuing education credit.)
Advance Preparation: Print and review course materials
Course Code: 093902
David T. Buente
Partner
Gayle S. Koch
Principal
Greg Rogers, J.D., CPA
President and Founder
Laura L. Leonard
Partner
George Hansen
Managing Director
David T. Buente, Partner, Sidley Austin LLP
- Overview of FAS 5/types of environmental claims/contingencies that generally trigger FAS 5
disclosure/accrual consideration - 8-10 minutes
- Governmental enforcement
- Private/governmental remedial liability
- Private party environmental litigation (e.g. toxic tort/property damage claims)
- Current enforcement trends - areas where we might expect to see new/more numerous disclosures based upon federal/state enforcement priorities
- Timing Issues - 5-7 minutes
- Common timeline for environmental enforcement matters
- Common timeline for remedial matters
- Assessing "probable and estimable" in the context of such timelines - when does
disclosure/accrual become appropriate and/or required
- Legal Developments - 5 minutes
- Asset retirement based liabilities - RCRA corrective action, asbestos, etc. and the evolving requirement for fair value estimation
- Effect of Burlington Northern (apportionment of liability rather than strict joint and several liability under CERCLA) on existing accounting guidance on estimating
remedial and toxic tort liabilities
- Touch on climate change - litigation disclosure issues - would allow a reference to fact that calls for increased climate change disclosure not prompted by FAS 5
considerations, but other SEC disclosure requirements
Laura L. Leonard, Partner, Sidley Austin LLP
** Speaker Agenda to be added soon.. **
Gayle S. Koch, Principal, The Brattle Group
- Best Practice/Standards
- AICPA SOP 96-1
- ASTM standards
- Environmental cost estimation
- Environmental disclosure
- Climate change financial disclosure (forthcoming)
- Consistency Issues with Other Estimates/Disclosures
- Voluntary reports
- Insurance estimates
- Internal management estimates
- Transactions, valuations, and tax matters
- Estimates disclosed by other PRPs
George Hansen, Managing Director, The Claro Group LLC
Valuation of Environmental Liabilities
- Definition of Fair Value
- Methodologies exist to estimate fair value where no liquid market price exists
- Point estimates
- Decision trees
- Probabilistic approaches (monte-carlo analysis)
- Illustration
- Sample decision tree/probabilistic model and result
- Discussion of basic statistics
- Application to portfolios
- Portfolio must be analyzed as a portfolio, not simply as sum of individual sites
- Independence/correlations among sites can be important
- Discounting and risk premiums
- Discount rates
1. Financial theory (CAPM)
2. Standards (FAS – e.g., ARO)
3. Regulatory (OMB)
- “Market” risk premium (e.g., liability-transfer transactions) – should there be one
Greg Rogers, J.D., CPA, President and Founder, Advanced Environmental Dimensions, LLC
- Theme: “Bridging the gap between GAAP and fair value”
- The difference between GAAP and fair value and the difference it makes
- Materiality of difference between GAAP and fair value estimates
- Materiality of off-balance sheet liabilities to overall financial condition
- SOX certifications under Section 302 and 906
- Fiduciary duties in the “zone of insolvency”
- Bankruptcy claims (e.g., Asarco, Tronox)
- Efficiency and effectiveness of operations
- Analytical techniques to test the accuracy of GAAP estimates and reach an indication of
fair value
- Methodology
- Data inputs
- Applications
- Discerning how the legitimate exercise of management discretion in the application of accounting standards influences accounting estimates over time
- Gaining insights into environmental management policies
- Developing an indication of fair value
- Assessing the materiality of off-balance sheet environmental liabilities
- Informed decision-making and the duty of care
- Business judgment rule
- Reliance on experts
- Reasonable availability of information
- Environmental Attorneys
- Accountants
- Finance Bankruptcy Attorneys
- M&A Attorneys
This is a must attend event to anyone interested in Accounting for Contingencies and Environmental Liabilities and finding out the best practices for affected entities
- New guidance explained by the most qualified key leaders & experts
- Hear directly from key regulators & thought leaders
- Interact directly with panel during Q&A