Environmental-related accounting and reporting

Investors, deal-makers, regulators and other stakeholders are increasingly focusing on the environmental performance of companies. Aside from the importance of sustainable business practices and corporate responsibility, environmental reporting in financial statements is extremely judgmental and subjective. This is especially true in sectors such as chemicals, energy, utilities, mining, metals, electronics, defense and others. This reporting requires companies to exercise judgment and expertise not only in the accounting area, but in the engineering area as well. How companies bring together these two disciplines is critical to effective environmental reporting.

Environmental exposures have complex and financially material impacts involving multiple parties. These impacts can be relevant to divestitures, acquisitions and IPOs where companies often look to:

  • Align and improve systems for estimation and reporting of environmental reserves, asset retirement obligations (AROs) and disclosures, and ensure the effectiveness of environmental-related reporting controls
  • Obtain in-depth industry and cross-industry leading practices and recommendations
  • Work with an advisor to liaise with their auditors and obtain greater assurance that their accounting and reporting conforms to ASC 410 and 450, and Sarbanes–Oxley Section 404

Not only do environmental liabilities, AROs, capital spending, compliance requirements and sustainability objectives have accounting and regulatory implications—they also impact deal value. Among the key environmental due diligence issues to be considered are:

  • The long-term valuation of environmental liabilities
  • Accounting issues with environmental remediation or AROs
  • The extent that environmental exposures are debt-like items and / or quality of earnings issues
  • Whether these issues present material risk or opportunity—or both, now or in the future
  • Whether the impact of sustainability-related issues and risks is fully understood

Investors are increasingly taking a longer-term view, seeking to understand how environmental and other sustainability issues may impact target businesses, and whether there are opportunities to minimize risks, drive out costs and enhance revenues.

PwC’s environmental specialists: Accounting, engineering, regulatory and industry know-how

Navigating environmental liability reporting requirements requires complex accounting skills, deep engineering and technical knowledge, an up-to-date compliance perspective and significant judgment. PwC’s environmental subject matter specialists are well-placed to bring together these different skill sets and help you enhance the quality of your financial reporting, audit readiness, liability valuations and the effectiveness of your reporting controls.

Contact us to learn more about how we can help you optimize business value, and minimize risks and uncertainties, through proactive resolution of your environmental reporting issues.