1996 Electronics Industry Environmental Roadmap - Civil and ...

Disposition
due date are called contingent liabilities. As a result of contingent liabilities, subject
firms may have to reduce current-period profits by the non-discounted disposition costs
for all past- and current-period sales. In subsequent periods, these firms will have to
reduce profits by the anticipated disposition costs for all current-period sales; this will
lower future profits. Although the exact amount (and even the timing) of the future
obligation is uncertain, financial accounting rules often require current-period profits to
be lowered by the expected amount of these future liabilities.
If proposals in Europe, Japan, and the U.S. become law, they may create substantial contingent
liabilities for some electronics-industry firms. When faced with contingent liabilities,
the firm can ignore the contingency (i.e., not make any public disclosure), report the
existence of the contingency in a note attached to the financial statements (but not
estimate its magnitude), or actually reduce current-period profits by the expected future
payment (i.e., make an accrual that reduces net income and net worth). Which of these
accounting treatments are used depends on the probability that the contingent liability will
actually be paid, the estimability of the contingency, and the accounting standards and
practices used in the country where the firm is issuing its financial-accounting report. For
a more detailed discussion of country-specific financial accounting standards relating to
the disclosure of contingent liabilities, refer to Appendix H.
5.3 Existing Practices and Infrastructure Fall Short of Meeting the Goal
There is a well-established solid waste management industry in the U.S. In recent years,
however, that industry has gone through a radical transformation in the manner of processing
certain materials (i.e., paper, aluminum, glass) as recycling programs became pervasive and
successful. So far, these programs have extended only slightly into products with significant
electronic content. Where such programs have been established, they are primarily directed at
removing inefficient equipment from the power grid (e.g., refrigerators) or diverting certain
hazardous materials from the municipal waste stream (e.g., mercury). Even in these cases,
however, programs in the U.S. are pilots, at best.
Under current regulations, a dual infrastructure has emerged in the U.S., one that addresses commercial
waste and another that addresses consumer waste. In this discussion of electronic
product disposition and PELM, it is important to distinguish between consumer and commercial
electronics. The infrastructure and approach for dealing with the two types of waste differ
greatly, and are briefly discussed below:
Commercial: A commercial electronic product is one that is purchased or leased by a
company, academic institution, or government. The practice of recycling and reusing selected
parts has been incorporated into commercial (non-consumer) electronic products
remanufacturing and service to a limited extent for more than 20 years in the U.S. The
basis for these approaches has been financial, such as parts-cost savings, as well as sound
environmental practice. The process is fairly well understood for computers and large
copiers or duplicators. It includes employee and contractor services used to
demanufacture product frames, cooling subsystems, memory components, printed wiring
boards, and a variety of other components. It is important to recognize that, in all cases, a
company owns the collected items and intends to reuse them in one way or another.
Thus, the producer has incentive to establish and maintain elaborate inventory and repair
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