3.2 Scope of ASC 410-30
ASC 410-30
Entities
15-1 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.
15-2 The recognition and measurement guidance in this Subtopic should be applied on a site-by-site basis.
Transactions
15-3 The guidance in this Subtopic does not apply to the following transactions and activities:
- 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.
- 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.
- 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.
- Recognizing liabilities of insurance entities for unpaid claims.
- Natural resource damages and toxic torts (see paragraphs 450-20-55-10 through 55-21).
- Asset impairment issues.
While ASC 410-30 is written specifically in the context of U.S. environmental laws, the Codification
excerpt above specifies that the subtopic applies to all entities that comply with U.S. GAAP regardless
of location. In addition, the excerpt clarifies that the “unit of account” for recognizing and measuring
environmental remediation liabilities is the individual site. Therefore, a reporting entity with foreign
operations must understand the relevant laws and regulations governing environmental remediation
obligations in the foreign jurisdictions in which it operates so that it can properly apply the guidance
in ASC 410-30. Further, with respect to environmental remediation obligations in the United States, a
reporting entity must also consider state laws and regulations, if applicable.
Connecting the Dots
As noted in ASC 410-30-15-3(c), the guidance in ASC 410-30 does not apply to “[e]nvironmental
remediation actions that are undertaken at the sole discretion of management and that are not
induced by the threat . . . of litigation or of assertion of a claim or an assessment.” Therefore,
ASC 410-30 does not require the recognition of a liability for environmental remediation activities
voluntarily undertaken by a reporting entity. The decision to incur the costs of performing such
environmental remediation activities in the future does not give rise to a present liability since
the entity has considerable discretion in changing its plans and avoiding the expenditure. The
determination of whether an environmental remediation action is voluntary or induced by the
threat of litigation involves considerable judgment and should be based on all relevant facts
and circumstances.