Where the Guesswork Ends and the Accrual Begins: Environmental Remediation Liabilities and Their Effects on the Managerial Decision-Making Process

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Dumdie, Corie Sue
Accounting; Natural Resource Economics
thesis / dissertation description
Environmental remediation is not new, but accounting for the costs of such a process is. In 1996, the first authoritative literature on accounting for the costs of cleaning up environmental degradation were established, and they gave insight into the accounting treatment for environmental remediation liabilities (ERLs). The aim of the thesis is to explain the new accrual methods for ERLs and show their importance as they have influenced many managerial philosophies. The thesis also examines some of the weaknesses of ERLs and illustrates possible changes for the future. The most important aspect of ERLs is that they have helped management begin to account for the costs of environmental degradation. In turn, companies are starting to change many of the policies they have concerning these clean-up costs. What this begins to illustrate, then, is that accounting policies may have a direct effect on how companies do business, and, therefore, the accounting profession needs to take a closer look at how it values the environment.