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9.3 Scope of the environmental obligation guidance
Publication date: 31 May 2023
us PP&E and other assets guide
ASC 410-30 requires that all reporting entities recognize a liability for obligations associated with environmental remediation liabilities. ASC 410-30-15 indicates the types of transactions subject to the environmental obligation guidance.
The provisions of this Subtopic apply to all entities. This Subtopic provides guidance on accounting for environmental remediation liabilities and is written in the context of operations taking place in the United States; however, the accounting guidance is applicable to all the operations of the reporting entity.
The recognition and measurement guidance in this Subtopic should be applied on a site-by-site basis.
The guidance in this Subtopic does not apply to the following transactions and activities:
a. Environmental contamination incurred in the normal operation of a long-lived asset (see Subtopic 410-20 for guidance that will apply if the entity is legally obligated to treat the contamination). Paragraph 410-20-15-3(b) explains that the obligation to clean up the spillage resulting from the normal operation of the fuel storage facility is within the scope of Subtopic 410-20. Additionally, that Subtopic applies if a legal obligation to treat environmental contamination is incurred or assumed as a result of the acquisition, construction, or development of a long-lived asset.
b. Pollution control costs with respect to current operations or on accounting for costs of future site restoration or closure that are required upon the cessation of operations or sale of facilities, as such current and future costs and obligations represent a class of accounting issues different from environmental remediation liabilities.
c. Environmental remediation actions that are undertaken at the sole discretion of management and that are not induced by the threat, by governments or other parties, of litigation or of assertion of a claim or an assessment.
d. Recognizing liabilities of insurance entities for unpaid claims.
e. Natural resource damages and toxic torts (see paragraphs 450-20-55-10 through 55-21).
f. Asset impairment issues.
Although ASC 410-30 is written in the context of a reporting entity with operations in the United States, the guidance applies to all reporting entities applying US GAAP. In addition to United States Federal laws, many companies are also subject to state, local, and foreign environmental laws and regulations. These laws and regulations need to be assessed in determining any environmental liabilities.
ASC 410-30-15-2 indicates that the recognition and measurement criteria for environmental obligations should be applied on a site-by-site basis. Accordingly, the unit of account when recognizing and measuring environmental obligations should be at the individual site level.
9.3.1 Environmental obligation scope exclusion – AROs
ASC 410-30-15-3 excludes environmental contamination incurred through the “normal operation” (including the acquisition, construction, or development) of a long-lived asset. These should be evaluated under ASC 410-20, Asset Retirement and Environmental Obligations, Asset Retirement Obligations. See PPE 3 for information on the recognition and measurement of AROs.
9.3.2 Environmental obligation scope exclusion – management discretion
ASC 410-30-15-3 excludes from its scope voluntary remediation actions that are undertaken at the sole discretion of management as there is no legal or regulatory obligation to incur these costs. As a reporting entity has the ability to change its remediation plans, including the timing and amount of costs to be incurred, the recognition of a liability is excluded from the scope of ASC 410-30.
PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
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