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Accounting For The Enviroment

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"Do you feel accountants and particularly auditors should play a more active role in these issues (environmental issues) or should the government and legal profession continue the leadership role?" Professor Gideon give us a deserve thinking of problem. Most of us have ignored the important role accountants play in national economic. Just like the saying:"To an extent, western market economies are not ruled by buyers and sellers; they're ruled by accountants.In the end, the rules of acceptable accounting are what determines whether companies are profitable and deals make money."

the role of accountants

.Enviornmental problem is not more just ethical issues for interpner

Investors are concerned about environmental responsibility. Investors want to know about potential hazards and future environmental liabilities of companies. Accounting firms are required during an audit to assess contingent liabilities, including environmental risks. Auditors check for the compliance with accounting standards once the environmental risk is identified.

Several regulation regarding environmental issues have been leased recent year,The FASB Emerging Issues Task Force (EITF) was formed in July 1984 to assist the FASB identify emerging issues affecting financial reporting and resolve problems in implementing authoritative pronouncements.

(1) SFAS No. 5 states under "Accounting for Contingencies" that a liability should be recognized in the financial statements if a loss is probable and the amount is estimable. If the loss amount is not estimable which is often the case, the contingency must be described in the footnotes to the financial statements.

(2) ETIF Issue No. 90-8 required that all environmental contamination costs be expenses as incurred unless costs extend the life or increase capacity of the property, costs mitigate or prevent future environmental contamination (that would otherwise occur), or costs are incurred to prepare a property for sale.

(3) ETIF Issue No. 93-5 concluded that an environmental liability must be evaluated independently from any potential claim for recovery. This recovery claim can reduce the liability only if it is probable. Securities Exchange Commission (SEC) standards state that it is appropriate to net the asset and liability if the asset’s recovery is recognized as probable. The asset and liability should be disclosed in the notes to the financial statements. The SEC approves discounting of liabilities to their present value. The Management Discussion and Analysis section of the annual report requires "forward looking" disclosures. The SEC in Interpretation No.14 states that registrants must take reasonable steps to identify the minimum end of the loss range with a higher priority on studying sites where a known problem exists. Registrants should assess the probability of an environmental obligation and any insurance recovery independently. Post-remediation monitoring approaches have been developed.

(4) AICPA Statement of Position (SOP) 96-1, “Environmental Remediation Liabilities,” covers auditing and accounting topics dealing with environmental issues. It details the responsibilities of corporations involved in environmental cleanup, and responsibilities of corporations to avoid environmental destruction. SOP 96-1 is a comprehensive environmental issues guide.

the U.S. Environmental Protection Agency and measuring and

announcing environmental cost and financial information relating to the environment.



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