Environmental cost management

Article Abstract:

Environmental costs have a significant impact on the bottom line of any company. Myers Manufacturing Inc realized this when it wanted to build a paint booth and had to weigh the benefits of a solvent-based process against those of a powder-paint process. Although the solvent-based system involves lower annual amortization and per-unit paint cost, the environmental costs of maintaining a solvent-based system make the powder-based system more attractive. Among the activities that increased environmental costs for the paint operations were cleaning, hazardous waste disposal, worker training, recordkeeping and wastewater treatment. Insurance, Superfund fee, air emissions fee and amortization of air-emissions permit also increase environmental costs. Strategies for managing environmental costs are end-of-pipe strategies, process-improvement strategies and pollution-prevention strategies.

Cost Accounting, Management, Environmental law, Regulatory compliance costs, Costs, Industrial, Industrial costs

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Transactions that may prompt environmental reporting problems

Article Abstract:

Companies need to comply with environmental-reporting requirements outlined in federal and state laws and mandates. Failure to do so could result in a penalty, lawsuit and contingency. Management should be careful when ensuring compliance and check if their transactions require disclosure. The most vulnerable deals are those involving real estate, secured transactions, bankruptcies, and mergers and acquisitions. Management accountants can control risk by taking precaution when entering into these transactions. If an evaluation of the minutes and the general ledger uncovers potential difficulties, they should review closing sales documents, pre-sales agreements, management stance on disclosure and intensity of contamination, and cleanup cost recovery liens. They should also keep an eye on decreased valuation of contaminated properties on the balance sheet.

Methods, Environmental aspects, Corporation reports, Company reports, Environmental auditing

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Coping with environmental and tort claims

Article Abstract:

Tort and environmental claims can wreak havoc with a company's finances. As companies such as Johns-Manville and Dow Corning have discovered, these claims can easily run into the billions of dollars. To protect themselves from the effects of such potentially burdensome litigation, some companies that are faced with such tort and environmental claims have begun adopting a bold strategy for preserving their operations: they are opting to reorganize under bankruptcy laws. This strategy was successfully used by asbestos producer Johns-Manville, which managed to fend off liability payments until a profits-linked payment schedule could be worked out. It was also used by Dow Corning to structure its $4 billion settlement of its breast-implant claims.

Finance, Corporations, Liability for environmental damages, Tort liability, Bankruptcy, Tort liability of corporations

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