Pollution Remediation Obligation
|Capital Asset Management
|To provide accounting guidance for when a liability needs to be reported for pollution remediation obligations. A pollution remediation obligation is an obligation to address the current or potential detrimental effects of existing pollution by participating in pollution remediation activities. For example, obligations to clean up spills of hazardous wastes and obligations to remove asbestos are pollution remediation obligations.
Pollution remediation activities include:
The following expenses are not part of the pollution remediation effort and should not be included:
In order to establish a liability for pollution remediation, the following three criteria must be met:
When the university knows or reasonably believes a site is polluted, the university will need to determine whether any one or more of the following apply:
If any one of the above apply AND costs are anticipated to be one million dollars ($1,000,000) or more and not completed within the current fiscal year, fill out the Pollution Remediation Obligation Events Acknowledgement form and forward to the Capital Asset Manager. The Capital Asset Manager will work with the department and Financial Management Services to establish the appropriate liability to be recorded.
If a pollution remediation obligation cannot be estimated it should be disclosed in the notes to the financial statements with the following:
The pollution remediation obligation should be recorded prior to the start of clean-up and as soon as the clean-up costs can be reasonably estimated. If a bid is requested and awarded, the contractor's bid can be used as the obligation estimate. The obligation should be recorded net of any insurance recoveries. The pollution remediation obligation should be evaluated quarterly and adjusted as needed.
In June 2009, Indiana University decided to remodel an academic building and remove any asbestos. The remodel project would commence in January 2010 and was expected to take two years. The remodeling contract was let for bid and the winning bid included an itemized amount for asbestos remediation of $1,200,000.
In certain circumstances pollution remediation costs may be capitalized. If any of the following criteria apply, Capital Asset Management will review and determine if the costs will be capitalized:
Pollution remediation obligation
An obligation to address the current or potential detrimental effects of existing pollution by participating in pollution remediation activities.
CSOP 22.0 Accounting for the Impairment of Capital Assets
GASB Statement No. 49 Accounting and Financial Reporting for Pollution Remediation Obligations
|Organizations that purchase capital assets.