GASB Pollution Remediation Standard Provides Useful Info

A review of the Governmental Accounting Standards Board’s 2006 standard for pollution remediation reporting found it generally achieved its goal of improving the disclosures of state and local governments’ obligations to control pollution.

The post-implementation review of GASB’s Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations, concluded the decade-old statement accomplished its objectives of providing more consistent, timely, and complete reporting of state and local governments’ pollution remediation obligations. The statement addresses accounting and financial reporting standards for pollution (including contamination) remediation obligations to address the current or potential detrimental effects of pollution by participating in pollution remediation activities such as site assessments and cleanups.

“The PIR report on Statement 49 tells us that, overall, the standard provides creditors and other users of financial statements with useful information,” said GASB Chair David A. Vaudt in a statement. “The GASB acknowledges the issues raised by some governments in applying certain provisions of the statement, and will consider those issues when addressing the provisions in the future.”

The report noted that one preparer and several auditors told the post-implementation review team that some information on pollution remediation obligations might be sensitive or confidential in nature because, for example, it might relate to ongoing litigation. “A government’s legal counsel might attempt to limit the level of disclosures surrounding PRO activities, making the process to accurately report, disclose, and audit the underlying information more difficult,” said the report. “We also learned that some governments sometimes struggle with the determination of whether they have met any of the obligating events and that application of the expected cash flow technique can be challenging for projects that span long periods.”

The PIR team based its report on input from financial statement users, preparers and auditors. They agreed the standard resolved the main issues underlying its stated need of reporting pollution remediation obligations in a more consistent, timely and complete way. Creditors and other users of financial statements received more useful information that they could incorporate in their analyses of when pollution remediation obligation amounts are significant. For most governments, though, the report noted pollution remediation obligation amounts are not significant.

The report is available here and GASB’s response letter is available here.

Now that the post-implementation review of the pollution remediation obligation standard is complete, the PIR team has turned its attention to reviewing another GASB standard, Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. For more information or to participate in a review, visit the Financial Accounting Foundation’s website.