(GASB) Statement 49, Accounting and Financial Reporting for ...

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OSRAP Memo 09-24Page 4 of 8March 24, 2009ScenarioPotentialPayment(a)AccrualAmount(a) X (b)Probability(b)1 1,000,000 10% 100,0002 2,000,000 60% 1,200,0003 3,000,000 30% 900,000Total 2,200,000In its entity-wide (full accrual) financial statements, the government would accrue aliability of $2.2 million and disclose in its Notes the nature and source of the pollutionremediation obligations, the amount of the estimated liability (if not apparent in thefinancial statements), the methods and assumptions used, potential changes in theliability, and estimated recoveries.A government’s pollution remediation liability should include all remediation work thegovernment expects to perform, including work performed for other responsible partiesor PRPs, even if the government is not required to perform the work. Recoveries thegovernment expects to receive from those other parties, as well as insurance recoveriesexpected from policies indemnifying it for its PRO, should reduce the expense.Unrealized/unrealizable recoveries should reduce the liability; realized/realizablerecoveries should be recognized separately as recovery assets.In periods following the completion of all pollution remediation work, if recoveriesbecome expected when no pollution remediation liability remains, those recoveriesshould be recorded as revenues and cash or accounts receivable when they becomerealized or realizable.As with pollution remediation liabilities, recoveries expected from other responsibleparties. PRPs and insurers should be measured based on their current value and use ofthe expected cash flow technique. Guidance is provided in paragraphs 21 and 22 ofGASB Statement 42, Accounting and Financial Reporting for Impairment of CapitalAssets and for Insurance Recoveries, to determine when insurance recoveries arerealized/realizable. Insurance recoveries are usually realizable when the insurer admitsor acknowledges coverage, and can take place before covered outlays are made.Since this Statement is effective for financial statements for fiscal periods beginningafter December 15, 2007, the measurement of pollution remediation liabilities mustbegin as of the beginning of that period so beginning net assets can be restated.However, governments that have sufficient objective and verifiable information to applythe expected cash flow technique to measurements in prior periods are required toapply the provisions retroactively for all such prior periods presented. This willapply primarily to discretely presented component units that prepare comparativefinancial statements.
OSRAP Memo 09-24Page 5 of 8March 24, 2009Please complete the following questionnaire and return to OSRAP as soon as possiblebut no later than April 3, 2009. You may contact me at (225) 342-0708 or Ms. SueSeab at (225) 342-1096 with any questions about GASB 49.Remember, all OSRAP memorandums and forms may be accessed through our homepage at http://www.doa.la.gov/OSRAP/index.htm.AA:ss
Page 1: BOBBY J INDALGOVERNORState of Louis
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