Requirements

SEC Regulation S-K

• Item 101, Description of Business [Text]
  Requires companies to disclose material effects from compliance with federal, state, and local environmental laws. So, it means disclosure of the costs a company has for its program of compliance with the environmental laws that apply. It means, as well, disclosure of the material effects that compliance with those laws is expected to have on company business, in particular, on "capital expenditures, earnings, and competitive position."
• Item 103, Legal Proceedings [Text]
  Requires disclosure of material pending legal proceedings against the company arising from federal, state, and local environmental laws. Its disclosure requirements apply not only to legal proceedings already initiated, but to those a company knows are contemplated by governmental authorities. No disclosure is required, however, if a claim for damages is less than 10 percent of company assets or if the monetary sanction from a governmental authority-initiated proceeding will not exceed $100,000.
• Item 303, Management's Discussion and Analysis (MD&A) of Financial Conditions and Results of Operations [Text]
  Requires analysis and disclosure of material effects of known trends or uncertainties on company operation and financial conditions. A company must make its decision about whether climate change, or global warming, constitutes a known trend.
• Item 307, Disclosure Controls and Procedures [Text]
  Requires a company's financial report to have a statement of management's conclusions on the effectiveness of the company's disclosure controls and procedures.
• Item 308, Internal Control over Financial Reporting [Text]
  Requires a company's financial report to have a statement of management's conclusions on the effectiveness of the company's internal controls for financial reporting, including a description of how that effectiveness was assessed. The company's public accounting firm must supply a statement, as well, attesting to that assessment.

FASB Statements, Interpretations, and Concepts

FASB Statements

• FAS 157, Fair Value Measurements, September 2006 [Text]
  Defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements.
  Effective date: FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, which for many companies means calendar year 2008 and thereafter.
  FASB granted a one-year deferment for application of FAS 157 to asset retirement obligations (and certain other applications), i.e., until fiscal years beginning after November 15, 2008, which for many companies means calendar year 2009 and thereafter. This deferment for asset retirement obligations was granted in FASB staff position (FSP) document FSP FAS 157-2, as proposed in FSP FAS 157-b.
  In FSP FAS 157-3, FASB describes determination of fair value in inactive markets. While the guidance addresses assets, it logically extends to liabilities.
  In FSP FAS 157-f, FASB provides guidance on the fair value measurement of liabilities under FAS 157.
• FAS 143, Accounting for Asset Retirement Obligations, June 2001 [Text]
  Instructs on disclosure of a material asset retirement obligation, which is a commitment for action to be taken in the future before those assets can be retired. Retirement would be sale, abandonment, recycling, or disposal in some manner. If the fair value of an asset retirement obligation can be estimated and is material, then the asset retirement obligation must be reported and its cost must be accrued on company books as soon as the retirement obligation is incurred, i.e., when the legal obligation for a retirement action is known, instead of waiting until the retirement action begins; and it must be kept on the books until the obligation is resolved.
  Effective date: FAS 143 is effective for financial statements for fiscal years beginning after June 15, 2002.
• FAS 141R, Business Combinations (Revised), December 2007 [Text]
  Instructs on the disclosure required by an acquirer, as a result of an acquisition or merger, of the assets acquired and the liabilities assumed (and any noncontrolling interest in the acquiree), which are measured at fair value as of the acquisition date.
  In FSP FAS 141R-1 [Text], FASB has amended FAS 141R to require measurement at (acquisition-date) fair value (only) "if [it] can be determined." FAS 141R-1 does not provide guidance on making that determination. If fair value cannot be determined, then the recognition criteria and guidance of FAS 5 and FIN 14 apply, i.e., recognition if a liability is probable and the amount of loss can be reasonably estimated. Following initial recognition, a company "shall develop a systematic and rational basis" for subsequent measurement of liabilities, "depending on their nature." FAS 141R-1 gives no guidance on developing that systematic and rational basis.
  In FSP FAS 141Ra [Text], FASB proposed to amend FAS 141R to require measurement at (acquisition-date) fair value (only) if it can be reasonably determined. It provided guidance for assessing when fair value could be reasonably determined. If it could not be reasonably determined, then measurement would proceed according to FAS 5 and FIN 14 instructions and the resulting measurement value would be called the future settlement amount. The instructions of FAS 141Ra have been replaced by those of FAS 141R-1 (above).
  Effective date: FAS 141R (and FAS 141R-1) applies to business combinations for which both the acquisition date and the beginning of the first annual reporting period are on or after December 15, 2008, which for many companies means calendar year 2009 and thereafter.
• FAS 5, Accounting for Contingencies, March 1975 [Text]
  Instructs on the disclosure of a material loss contingency, which is a contingent liability or asset loss or impairment. In a loss contingency, a financial exposure is recognized that requires the occurrence of one or more future events in order to resolve uncertainty, and that resolution precedes the incurrence of an actual cost of responding. In fact, the resolution might indicate no need for responding and hence no cost. Before the resolving events, however, a response cost at current value, if material, must be accrued on company books and reported in the financial statement when a company determines that a need to respond is probable and that the cost is estimable.
  Effective date: FAS 5 is effective for fiscal years beginning on or after July 1, 1975.

FASB Interpretations

• FIN 47, Accounting for Conditional Asset Retirement Obligations, March 2005 [Text]
  Clarifies that the term conditional asset retirement obligation, as used in FAS 143, refers to a legal obligation to perform an asset retirement activity in which the timing or method of settlement are conditional on a future event that may not be within control of the company. The obligation to perform the asset retirement activity is unconditional, however, even if there is uncertainty about the timing and method of settlement.
  If the fair value of a conditional asset retirement obligation can be estimated and is material, then the conditional asset retirement obligation must be reported and its cost must be accrued on company books as soon as the retirement obligation is incurred.
  Effective date: FIN 47 is effective for fiscal years ending after December 15, 2005, e.g., for calendar year 2005 and thereafter.
• FIN 14, Reasonable Estimation of the Amount of a Loss, September, 1975 [Text]
  Clarifies that, under FAS 5, a company does not delay accrual of a loss until only a single amount can be reasonably estimated. Instead, when the reasonable estimate of loss is a range, then it follows an amount of loss has occurred and can be estimated. If no value in the range appears better than another, then a company will use and accrue the minimum value.
  Effective date: FIN 14 is effective for financial statements beginning after October 15, 1976.

FASB Concepts

• CON 7, Using Cash Flow Information and Present Value in Accounting Measurements, February 2000 [Text]
  Provides guidance on measurement issues, but not recognition questions, in using cash flow information and present value in accounting measurements.
• CON 6, Elements of Financial Statements, December 1985 [Text]
  Identifies the elements of financial statements for business enterprises and not-for-profit organizations, and defines key terms, such as asset and liability.
• CON 5, Recognition and Measurement in Financial Statements of Business Enterprises, December 1984 [Text]
  Sets forth fundamental recognition criteria and guidance on what information should be formally incorporated into financial statements and when.

ASTM Standards

• ASTM E2173-07, Standard Guide for Disclosure of Environmental Liabilities, April 2007 [Text]
  Guides the determination of conditions that warrant disclosure and the content of apppropriate disclosure. Includes the recommendation that disclosure be made when environmental liabilities are material in the aggregate, not just individually.
• ASTM E2137-06, Standard Guide for Estimating Monetary Costs and Liabilities for Environmental Matters, December 2006 [Text]
  Guides the application of five approaches for estimating costs and liabilties for environmental matters. Contends that, given adequate information, the present value approach for cost estimation is second only to a quoted price in terms of robustness and comprehensiveness of the estimate and the quantification of uncertainty about the estimate.

AICPA Standard

• AICPA SOP 96-1, Environmental Remediation Liabilities, Statement of Position (SOP), October 1996 [Text]
  Instructs on environmental reporting and attempts to clarify how to determine the probability and the reasonably estimated amount of an environmental remediation liability.