Articles

Environmentally Insolvent: Fair Value Measurement of Environmental

[July 14, 2008]

A new approach to valuing contingencies under U.S. and international accounting standards could enable creditors, trustees, shareholders and other interested parties to argue that corporate environmental liabilities are vastly understated. Asarco, which filed bankruptcy in 2007 with unfunded and undisclosed environmental cleanup liabilities estimated between $500 million and $1 billion, is a case in point. Older accounting standards that favored certainty over projections are being replaced with standards that favor (market-based) projections over certainty. The result will be more recorded liabilities and higher estimates. Although the new standards will not be fully phased in for years, litigants need not wait to use these standards to show that seemingly viable companies are in fact insolvent and were insolvent long before. This new approach will certainly play in a role in fraudulent transfer and preferential transfer litigation, as well as in a variety of other disputes involving the “if” and “when” a corporation became insolvent.see more click here to view article

http://www.abanet.org/buslaw/committees/CL160000pub/newsletter/200806/rogers.pdf