Believing this is the appropriate time to evaluate the problems of applying accounting and auditing standards to environmental matters, the American Institute of CPAs accounting and auditing standards divisions convened a two-day environmental issues roundtable in New Orleans. The 30-plus participants included industry CPAs and representatives: of the AICPA accounting standards executive committee (AcSEC), the auditing standards board, the Financial Accounting Standards Board, the Securities and Exchange Commission, the American Bar Association and the Canadian Institute of Chartered Accountants (CICA) as well as AICPA technical staff. (Copies of the roundtable proceedings are expected to be available for purchase from the AICPA order department during the second quarter of 1993.)
Environmental obligations have reached a critical level in the United States. Since the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) was adopted, U.S. entities have found themselves increasingly identified by the Environmental Protection Agency as potentially responsible parties in hazardous waste disposal site cleanups. This so-called superfund legislation maintains a strict liability standard--penalties are assessed without regard to fault. Entities failing to respond to EPA cleanup orders are subject to substantial penalties.
With cleanup costs reaching staggering proportions, CPAs need to advise clients on how to properly recognize, measure and disclose environmental costs. Little specific guidance exists currently, however, on how this should be done. Auditors must understand what responsibility they have, if any, to detect and report unrecorded envionmental liabilities and how to evaluate environment-related financial statement assertions.
The roundtable's three specific objectives were to
* Examine problems CPAs have in practice applying generally accepted accounting principles to environment-related financial statement assertions.
* Identify environmental issues for which authoritative accounting and auditing guidance may be needed.
* Provide a starting point for developing guidance, including continuing professional education conferences and courses, on applying accounting and auditing standards to environmental matters.
To help them assess the need for new Or revised accounting and auditing guidance, roundtable participants heard presentations on
* The legal aspects of environmental liability.
* Perspectives on environmental accounting issues from the FASB, the SEC and industry.
* Auditing environmental liabilities.
Three accounting breakout sessions considered how to recognize, measure and display environmental obligations on an entity's balance sheet. Two auditing breakouts evaluated existing practice and auditors' acceptance of additional detection responsibilities.
Participants also heard a presentation on Canadian initiatives in accounting for environmental costs from Jo-Ann Longworth, manager of accounting research for Alcan Aluminium Ltd. in Montreal, who chairs the CICA study group on accounting for and disclosure of environmental measures within the existing financial reporting framework. In forming the study group, the CICA believed what little guidance there was specifically covering accounting for environmental measures raised more questions than it answered. …