FASB Proposes Expansion of Loss Contingency Disclosure

On June 5, 2008, FASB released for public comment Proposed Statement of Financial Accounting Standards, Disclosure of Certain Loss Contingencies. The proposed standard would significantly expand the quantitative and qualitative disclosure requirements for loss contingencies under SFAS 5 and 141(R). In issuing the draft, FASB is responding to investors and other users of financial statements who are seeking additional information to assess the likelihood, timing, and amount of future cash flows associated with loss contingencies. The proposed standard would be effective for fiscal years ending after December 15, 2008, and interim and annual periods in subsequent fiscal years.

Responses from interested parties wishing to comment on the proposed standard must be received in writing by August 8, 2008. Interested parties should submit their comments by email to director@fasb.org, File Reference No. 1025-300.

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Investor Group Asks Congress for Climate Change Legislation, Saying Lack of Clear Policy Undermines Long-Term Economic Competitiveness

On May 30, 2008, a group of more than 50 leading investors, organized by Ceres and the Investor Network on Climate Risk (INCR), issued a letter to Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell calling for a national climate policy to reduce U.S. greenhouse gas emissions by at least 60 to 90 percent below 1990 levels by 2050. The request is similar to reductions that would have been achieved under the Lieberman-Warner bill. The letter's message is that climate policy uncertainty due to the lack of federal regulations may be undermining companies’ long-term competitiveness because it is preventing them from making large-scale capital investments in clean energy and other low-carbon technologies and practices. The letter also notes that the Securities and Exchange Commission and other financial regulatory bodies should clarify what companies should disclose with respect to climate change in their regular financial reporting.

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Ceres Publishes First-Ever Ranking of 40 Leading Banks on Climate Change Strategies

On January 10, 2008, the Ceres investor coalition issued the first-ever report that analyzes climate change governance practices of 40 of the world’s largest banks. The report employs a “Climate Change Governance Checklist” to evaluate how 16 U.S. and 24 non-U.S. banks are addressing climate change through board of director oversight, management performance, public disclosure, GHG emissions accounting and strategic planning. 34 of the 40 banks responded to the latest climate-disclosure annual survey conducted by the Carbon Disclosure Project, a nonprofit group that seeks information on climate risks and opportunities from companies on behalf of investors, and 28 of the banks have calculated and disclosed their GHG emissions from operations. The report concludes that more action is needed across European, North American and Asian banks alike. One recommendation is that banks provide better disclosure about the financial and material risks posed by climate change, their own emission reduction strategies, and emissions resulting their financing and investment.

The report is located here with profiles of U.S. banks located here

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Senate Committee holds hearing on Climate Disclosure

On October 31, 2007, the Senate Committee on Banking, Housing and Urban Affairs held a hearing on "Climate Disclosure: Measuring Financial Risks and Opportunities." Environmental Disclosure Committee member Jeffrey A. Smith, Partner at Cravath, Swaine, & Moore LLP, gave testimony. Download his article, in The Review of Securities & Commodities Regulation, based on his testimony: Disclosure of Climate Change Risks 1.08. Following the hearing, Senator Chris Dodd, D-Conn., Chairman of the Senate Committee on Banking, Housing and Urban Affairs, and Senator Jack Reed, D-R.I., Chairman of the Subcommittee on Securities, Insurance and Investment, wrote to Securities and Exchange Commission Chairman Chris Cox on December 6, 2007, urging the SEC to issue guidance on climate disclosure requirements: Final Cox letter on Climate Disclosure

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Environmental Disclosure Committee holds “Quick Teleconference” on Environmental Issues to Consider for 2008 10-K Preparation
On December 4, 2007, the Environmental Disclosure Committee held a Quick Teleconference to discuss practical steps registrants should take to address environmental issues in their 10-Ks and financial statements for 2008. Notable developments that were discussed in the teleconference included:

• Subpoenas issued to public electric utilities by the NY Attorney General about the adequacy of climate change disclosure in SEC filings;
• Congressional consideration of climate change disclosure in SEC filings;
• A petition by Ceres, other environmental groups, institutional investors and state pension fund managers, and a petition by the Free Enterprise Action Fund, requesting the SEC to clarify when and how registrants should disclose information about climate change. Download the petition: Full Petition and SEC 2nd Petition;
• SEC enforcement actions concluded during the past 12 months about environmental reserve issues;

The moderator was Maureen M. Crough, Partner at Sidley Austin LLP, New York, NY. Panelists were Mindy S. Lubber of Ceres, Boston, MA. Download her presentation: ML ABA Presentation 6, Greg Rogers, of Guida, Slavich & Flores, P.C., Dallas, TX, and Jeffrey A. Smith, Partner at Cravath, Swaine & Moore LLP, New York, NY. Handouts also included the CERES' Global Framework for Climate Risk Disclosure: Global Framework

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Major Investors, State Officials, Environmental Groups Petition SEC to Require Full Corporate Climate Risk Disclosure

On September 18, 2007, a broad coalition of investors, state officials with regulatory and fiscal management responsibilities, and environmental groups filed a landmark petition asking the Securities and Exchange Commission (SEC) to require publicly-traded companies to assess and fully disclose their financial risks from climate change. The coalition also formally asked the Commission's Division of Corporation Finance to immediately begin "[c]losely scrutinizing the adequacy of registrants' climate disclosures" under existing law. Access the Ceres announcement for additional information.

Separately, on October 23, 2007, the Free Enterprise Action Fund filed its own petition with the SEC. The fund, which is advised by Action Fund Management LLC in Potomac, Md., wants disclosure to shareholders of the business risks of laws and regulations intended to address global warming: SEC 2nd Petition

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New York Attorney General Launches Investigation into Energy Company Emissions Disclosure

On September 14, 2007, New York Attorney General Andrew Cuomo sent subpoenas to top executives of five energy companies with plans to build coal-fired power plants: AES Corporation, Dominion, Dynegy, Peabody Energy and Xcel Energy. Letters accompanying the subpoenas asked whether investors received adequate information about the potential financial liabilities of carbon dioxide emissions. See the New York Times article.

FASB Issues Standard on Fair Value Measurement

On September 6, 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard No. 157, Fair Value Measurements. The new accounting statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. FAS 157 applies under other accounting pronouncements that require or permit fair value measurements, including statements relevant to financial reporting of environmental liabilities such as FAS 141-R, FAS 143, FAS 144, FIN 45, and FIN 47. The new FASB pronouncement does not require any new fair value measurements. However, for some entities, its application will change current practice. [Full Text] (Excludes Appendix E) (Appendix E—Amendments to APB and FASB Pronouncements will be posted to the FASB website on or before September 21, 2006) [Summary]

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Environmental Liability Disclosure Survey Shows an Array of Inconsistent Practices

The Brattle Group's web-based survey benchmarks current attitudes, practices, challenges, and trends relating to environmental and product liability estimation and disclosure. Download a summary of the survey, which focuses on the extent to which companies disclose liabilities, define what is “material,” and are aware of recent and proposed changes in disclosure standards, guidance, and procedures.

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Ashland Inc. Announces Possible SEC Civil Action for Environmental Remediation Reserves

On April 25, 2006, SEC staff notified Ashland of the staff's intent to seek authorization to pursue a civil action against Ashland relating to adjustments that reduced the company's environmental remediation reserves for 1999 and 2000. Read Ashland's 8-K filing for more details.

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New Study on Impact of FIN 47

The Controllers' Leadership Roundtable at the Corporate Executive Board has released an Executive Briefing on "The Impact of FIN 47 (Thus Far)." Major findings include:

1. Financial Statement Impact Varies Widely Across Companies – Within and without industries, companies are reporting quite disparate impact from the implementation of FIN 47. Take, for example, the Industrial Manufacturing industry, where United Technologies reported a $95 million impact in 2005, while the impact on Caterpillar Inc. was immaterial.
2. FIN 47 Resource Consumption Varies Widely Across Companies – Based on our recent survey of Roundtable members, the number of man-hours spent implementing FIN 47 varies greatly – as man-hours reported ranges from six (6) to 5,000.
3. Not all Companies are Estimating the Value of Identified Conditional AROs – The vast majority of disclosure language either quantifies the fair value of identified conditional AROs or states that any such additional obligations are immaterial to the business – however, a select few companies have affirmatively stated that conditional AROs have been identified but remain un-estimable.

The Controllers' Leadership Roundtable provides best practices research, tools, and executive education to a membership of Controllers at the world's leading corporations and not-for-profit institutions.