Statement: Implementation of GASB 49

GASB 49 addresses accounting and financial reporting standards for pollution remediation obligations, which are obligations to address the current or potential detrimental effects of existing pollution by participating in pollution remediation activities such as site assessments and cleanups.  The scope of this statement excludes pollution prevention or control obligations with respect to current operations, and future pollution remediation activities that are required upon retirement of an asset.

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.  Pollution remediation activities include:

  • Pre-cleanup activities, such as the performance of a site assessment, site investigation, and corrective measures feasibility study, and the design of a remediation plan
  • Cleanup activities, such as neutralization, containment, or removal and disposal of pollutants, and site restoration
  • External government oversight and enforcement-related activities, such as work performed by an environmental regulatory authority dealing with the site and chargeable to the institution
  • Operation and maintenance of the remedy, including required monitoring of the remediation effort

Outlays for Pollution Remediation Activities

Pollution remediation outlays include all direct outlays attributable to pollution remediation activities (payroll and benefits, equipment and facilities, materials, legal and other professional services) and may include estimated indirect outlays (including overhead).  The following outlays are not part of performing pollution remediation and should not be included:  fines, penalties, toxic torts, product and process safety outlays, litigation support involved with potential recoveries, and outlays borne by society at large rather than by a specific government.

Pollution remediation obligations generally will result in recognition and reporting of pollution remediation liabilities.  When an institution knows or reasonably believes that a site is polluted, the institution should determine whether one or more components of a pollution remediation obligation are recognizable as a liability when any of the following events occurs:

  • The institution is compelled to take remediation action because pollution creates an imminent endangerment to public health or welfare or the environment.
  • The institution is in violation of a pollution prevention-related permit or license.
  • The institution is named, or evidence indicates that it will be named, by a regulator as a responsible party or potentially responsible party for remediation, or as an institution responsible for sharing costs.
  • The institution is named, or evidence indicates that it will be named, in a lawsuit to compel the institution to participate in remediation.
  • The institution commences, or legally obligates itself to commence, cleanup activities or monitoring or operation and maintenance of the remediation effort.

Recognition Benchmarks

Pollution remediation liabilities should be recognized as the ranges of their components become reasonably estimatable.  In some cases, the institution may have insufficient information to reasonable estimate the ranges of all components of its liability.  In these cases, the institution should recognize pollution remediation liabilities as the range of each component of the liability becomes reasonably estimatable.

The range of an estimated remediation liability often will be defined and periodically refined, as necessary, as different stages in the remediation process occur.  Certain stages of a remediation effort or process provide benchmarks that should be considered when evaluating the extent to which a range of potential outlays for a remediation effort or process is reasonably estimatable.  Benchmarks should not, however, be applied in a manner that would delay recognition beyond the point at which a reasonable estimate of the range of a component of a liability can be made.  The recognition benchmarks that follow typically apply to pollution remediation obligations that are not common or similar to situations at other sites with which the institution has experience.  At a minimum, the estimate of a pollution remediation liability should be evaluated as each of these benchmarks occurs.

  • Receipt of an administrative order.  The ability to estimate outlays resulting from administrative orders varies with factors such as site complexity and the nature and extent of the work to be performed.  The outlays associated with performing this requisite work generally are estimatable within a range, and recognition of a remediation liability for this work generally should not be delayed beyond this point.
  • Participation, as a responsible party or a PRP, in the site assessment or investigation.  At this stage, the institution has been identified as a responsible party and has agreed to pay all or part of a study that will investigate the extent of the environmental impact and to identify site-remediation alternatives.  The total outlay associated with the site assessment or investigation generally is estimatable within a reasonable range.  At a minimum, the institution should recognize its share of the estimated total outlays associated with the site assessment or investigation.
  • Completion of a corrective measures feasibility study.  If the institution had not previously concluded that it could reasonably estimate all components of the remediation liability, recognition should not be delayed beyond this point, even if uncertainties remain.
  • Issuance of an authorization to proceed.  At this point, the institution’s estimate normally can be refined based on the specified preferred remedy and a preliminary allocation of the total remediation outlays.
  • Remediation design and implementation, through and including operation and maintenance, and post-remediation monitoring.  During the design phase, the institution is able to provide more precise estimates of the total remediation outlays.  Further information likely will become available at various points until the site remediation work is completed.


Pollution remediation liabilities should be measured based on the pollution remediation outlays expected to be incurred to settle those liabilities.  Pollution remediation liabilities should be measured at their current value.  The current value of a pollution remediation liability should be based on reasonable and supportable assumption about future events that may affect the eventual settlement of the liability.

Pollution remediation liabilities should be measured using the expected cash flow technique, which measures the liability as the sum of probability-weighted amounts in a range of possible estimated amounts – the estimated mean or average.

Accounting for Recoveries

Expected recoveries from other responsible parties, and expected recoveries from insurance policies that indemnify the institution for its pollution remediation obligations, should be included in the measurement by reducing the expense and affecting the liability as follows:

  • If the expected recoveries are not yet realized or realizable, they should reduce the measurement of the institution’s pollution remediation liability.
  • If the expected recoveries are realized or realizable, they should be recognized separately from the liability as recovery assets (cash or receivables).

If recoveries become expected in periods following the completion of all remediation work, such that a pollution remediation liability no longer exists, those transactions should be recorded as revenue and cash/receivable when they are realized or realizable.

Capitalization of Pollution Remediation Outlays

Generally, pollution remediation outlays, including outlays for property, plant, and equipment, should be reported as an expense when a liability is recognized. Pollution remediation outlays should be capitalized when goods and services are acquired if acquired for any of the following circumstances:

  • To prepare property in anticipation of a sale.  Institution should only capitalize amounts that would result in the carrying amount of the property not exceeding its estimated fair value upon completion of the remediation.
  • To prepare property for use when the property was acquired with known or suspected pollution that was expected to be remediated.  Institutions should capitalize only those pollution remediation outlays expected to be necessary to place the asset into its intended location and condition for use.
  • To perform pollution remediation that restores a pollution-caused decline in service utility that was recognized as an asset impairment.  Institutions should capitalize only those pollution remediation outlays expected to be necessary to place the asset into its intended location and condition for use.
  • To acquire property, plant, and equipment that have a future alternative use.  Outlays should be capitalized only to the extent of the estimated service utility that will exist after pollution remediation activities uses have ceased.

Display in Financial Statements

Pollution remediation costs should be reported in the statement of activities and statement of revenues, expenses, and changes in net assets as a program or operating expense, special item, or extraordinary item in accordance with the guidance in paragraphs 41-46, 55, 56, 101, and 102 of Statement 34.


For recognized pollution remediation liabilities and recoveries of pollution remediation outlays, institutions should disclose the following:

  • The nature and source of pollution remediation obligations
  • The amount of the estimated liability, the methods and assumptions used for the estimate, and the potential for changes
  • Estimated recoveries reducing the liability.

For pollution remediation liabilities, or portions thereof, that are not yet recognized because they are not reasonably estimable, institutions should disclose a general description of the nature of the pollution remediation activities.

Effective Date

This Statement is effective beginning FY 2008-09.  Institutions that have sufficient and verifiable information to apply the expected cash flow technique to measurements in prior periods should apply the provisions of this Statement retroactively for all such prior periods presented.  Institutions that do not have that information should apply the provisions of this Statement as of the effective date.  In that case, pollution remediation liabilities should be measured at the beginning of the period so that beginning net assets can be restated.