Please update your browser

You're using a version of Internet Explorer that isn't supported by Questia.
To get a better experience, go to one of these sites and get the latest
version of your preferred browser:

Cleaning Up Environmental Accounting

By Hochman, Joel A. | The National Public Accountant, June 1998 | Go to article overview

Cleaning Up Environmental Accounting


Hochman, Joel A., The National Public Accountant


(The following article presents a general background and summation of the emergence of environmental liabilities and the role accountants play in recognizing such liabilities. In subsequent issues we will present practical, everyday examples of small businesses facing environmental liability. If your client base includes such businesses as a gas station, dry cleaner or lawn service, you may find this information helpful in your practice.)

The problem of environmental pollution is a pervasive one for modern society. It is also a potentially expensive problem for modern businesses, which, under federal law, can be held financially liable for the effects of pollution they caused or to which they contributed.

For several years, the accounting profession has faced the dilemma of when and how potential environmental liabilities should be recognized, measured and disclosed on financial statements. There was little definitive guidance for accountants working in the industry, nor for practitioners who had businesses as clients.

In 1996, the American Institute of Certified Public Accountants (AICPA) issued a statement of position that addresses accounting matters associated with environmental liabilities. This SOP provides some of the most extensive guidance ever available to accountants on environmental accounting issues.

Regulation Begins

Environmental regulation began in the late 1950s when federal lawmakers considered the first laws aimed at decreasing the nation's water and air pollution. One of the first major environmental bills was the Clean Air Act of 1970, which established emissions standards for several primary pollutants. That same year, Congress set up the Environmental Protection Agency to enforce federal legislation regulating air and water pollution, solid waste and disposal, pesticide control, and radiation. Ten years later, lawmakers passed the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), which established the Superfund, a pool of federal money used to pay for cleanup, or remediation, of some contaminated lands. All parties identified by the EPA as responsible for the contamination at a site must share costs for cleanup and ongoing remediation efforts. If any party refuses to do so, EPA has the authority, under CERCLA, to clean up the site using Superfund money, then demand payment plus treble damages from that party.

The move toward stronger environmental laws has continued in the 1990s. The Clean Air Act Amendment of 1990s, for example, set stringent new air quality standards. In a State of the Union Address, President Clinton urged toughening environmental regulations by asking Congress ". . . to pass my proposal to make big polluters live by a simple rule: If you pollute our environment, you should pay to clean it up."

What does this mean for business? It could mean significant additional expenses - expenses that must be accounted for properly. According to an article in the January 1993 issue of The CPA Journal, the nation's overall environmental liability as of early 1993 was estimated to be 2-5% of the gross domestic product. This figure includes costs for cleaning up air emissions, meeting water quality standards and removing asbestos. By the end of 1990s, the EPA had spent more than $4.8 billion to clean up some of the 1,200 sites it had designated as needing long-term remediation. (The EPA estimates that by the year 2000, it will add another 1,100 sites to its list of sites needing extensive remediation.) In The CPA Journal article, the current cost of cleaning up air emissions was put at around $25 billion a year. Meeting the standards of the Clean Water Act costs about $30 billion per year. An estimated $200 billion will be required to clean up asbestos in buildings across the nation.

Besides cleanup costs, companies face the possibility of paying huge awards in lawsuits filed over environmental pollution. In the 1990s, a Missouri jury awarded $16.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Cleaning Up Environmental Accounting
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.