Changes in GAAP Put Spotlight on Environmental Disclosure

Published in The Metropolitan Corporate Counsel, April 2006.

Recent changes to accounting rules governing asset retirement obligations, particularly with respect to environmental legal obligations, have put the spotlight on environmental disclosure. The new rules are quite complex and ambiguous. Many of the finer points in their application have yet to be worked through by the accounting industry, in-house counsel and environmental specialists. Until a principled, consistent method for applying these new accounting rules emerges, companies and their advisers will be navigating in uncharted waters, and therefore would be well-advised to exercise caution. The practical application of the new rules will also be influenced to a significant extent by continued pressure from the investment and environmental communities for full and robust disclosure of environmental risks to investors.