Chapter 13, Problem 1SSC

Surfing the Standards Case 1: Environmental Remediation Costs

Environmental remediation costs have become increasingly prevalent in the last few decades. Read paragraphs 4 through 7, paragraph 15, and paragraph 25 of ASC 410-30-05. Also read paragraphs 1 through 13 of ASC 410-30-25.

1. 1. Briefly explain the following terms:
   1. a. Environmental remediation liability
   2. b. Superfund
   3. c. Potentially responsible parties
2. 2. Are environmental remediation liabilities a type of contingent liability?
3. 3. Are the rules governing the accrual of environmental remedial liabilities the same as those governing the accrual of other contingent liabilities?
4. 4. Based on your review of the literature respond to the following questions.
   1. a. What factors do firms consider in the estimation of environmental remediation liabilities?
   2. b. What does an entity do if it can only reasonably estimate some of the components of the liability?
   3. c. What should be done if the entity can only estimate a range for the obligation?
   4. d. What should be done if there are uncertainties about the share of the obligation the entity will bear?