Observations from the front lines

May 2014
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Observations from the front lines

At a glance

Unexpected expenditures and accounting adjustments – like those arising from environmental obligations – can dramatically impact capital budgeting and future earnings. Companies have found that practices vary widely across sectors and both engineering and accounting expertise are critical in assessing environmental obligations.

Observations from the front lines provides PwC's insight on current economic issues, our perspective regarding the business impacts, and actions we have seen companies taking to effectively address those issues.

Evaluating environmental liabilities and their impacts on future earnings

Companies with environmental exposures or are subject to them as part of a deal, are often unaware of the qualitative and quantitative efforts needed to support the appropriate assessment of these obligations as well as quantifying future economic impacts. Enhancing the quality of financial reporting, audit readiness, liability valuations, internal controls as well as deal negotiations will allow management to make more informed decisions about the business while proactively managing their company’s exposures.

Highlights in this issue:

  • If considering acquisitions, divestitures or spin-offs, be aware of both the reporting complexity and impacts to deal value from environmental obligations.
  • Environmental liability reporting is highly judgmental; fully understanding the pitfalls, traps and nuances of this area is complex.
  • Companies must effectively blend engineering and accounting expertise to evaluate environmental exposures, and manage business risks.
  • There are significant differences in accounting practices in this area, which may lead to future earnings hits in deals.
 

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