ICAS ICAS logo

Quicklinks

  1. About Us

    Find out about who we are and what we do here at ICAS.

  2. Find a CA

    Search our directory of individual CAs and Member organisations by name, location and professional criteria.

  3. CA Magazine

    View the latest issues of the dedicated magazine for ICAS Chartered Accountants.

  4. Contact Us

    Get in touch with ICAS by phone, email or post, with dedicated contacts for Members, Students and firms.

Login
  • Annual renewal
  • About us
  • Contact us
  • Find a CA
  1. About us
    1. Governance
  2. Members
    1. Become a member
    2. Newly qualified
    3. Manage my membership
    4. Benefits of membership
    5. Careers support
    6. Mentoring
    7. CA Wellbeing
    8. More for Members
    9. Area networks
    10. International communities
    11. Get involved
    12. Top Young CAs
    13. Career breaks
    14. ICAS podcast
    15. Newly admitted members 2022
    16. Newly admitted members 2023
  3. CA Students
    1. Student information
    2. Student resources
    3. Learning requirements
    4. Learning updates
    5. Learning blog
    6. Totum Pro | Student discount card
    7. CA Student wellbeing
  4. Become a CA
    1. How to become a CA
    2. Routes to becoming a CA
    3. CA Stories
    4. Find a training agreement
    5. Why become a CA
    6. Qualification information
    7. University exemptions
  5. Employers
    1. Become an Authorised Training Office
    2. Resources for Authorised Training Offices
    3. Professional entry
    4. Apprenticeships
  6. Find a CA
  7. ICAS events
    1. CA Summit
  8. CA magazine
  9. Insight
    1. Finance + Trust
    2. Finance + Technology
    3. Finance + EDI
    4. Finance + Mental Fitness
    5. Finance + Leadership
    6. Finance + Sustainability
  10. Professional resources
    1. Anti-money laundering
    2. Audit and assurance
    3. Brexit
    4. Business and governance
    5. Charities
    6. Coronavirus
    7. Corporate and financial reporting
    8. Cyber security
    9. Ethics
    10. Insolvency
    11. ICAS Research
    12. Pensions
    13. Practice
    14. Public sector
    15. Sustainability
    16. Tax
  11. CPD - professional development
    1. CPD courses and qualifications
    2. CPD news and updates
    3. CPD support and advice
  12. Regulation
    1. Complaints and sanctions
    2. Regulatory authorisations
    3. Guidance and help sheets
    4. Regulatory monitoring
  13. CA jobs
    1. CA jobs partner: Rutherford Cross
    2. Resources for your job search
    3. Advertise with CA jobs
    4. Hays | A Trusted ICAS CA Jobs Partner
    5. Azets | What's your ambition?
  14. Work at ICAS
    1. Business centres
    2. Meet our team
    3. Benefits
    4. Vacancies
    5. Imagine your career at ICAS
  15. Contact us
    1. Technical and regulation queries
    2. ICAS logo request

The cost of clean up

  • LinkedIn (opens new window)
  • Twitter (opens new window)
Marie Gardner By Marie Gardner CA, Head of Research

8 October 2020

Key points:

  • Ambiguity about IAS 37 may be handing the cost of long-term liabilities in polluting-prone industries to the public.
  • Standard setters should require disclosing the discount rates applied to facilitate comparability and allow for users of financial statements and other key stakeholders to see inside the ‘black box’ of accounting for decommissioning liabilities.
  • Preparers should also include, and auditors demand, enhanced disclosures, augmented by a comprehensive narrative on the major uncertainties surrounding key discounting parameters.

New research funded by ICAS finds that ambiguity about IAS 37 may be handing the cost of long-term liabilities to the public.

There has been a focus in recent years on increasing the amount of sustainability reporting firms provide to the market and the broader stakeholder community. But existing international accounting rules could, with improvement or better application, help stimulate organisations into being more transparent in their presentation of the costs of decommissioning and clean-up operations in pollution-prone industries.

When a company acquires certain types of long-term assets, such as an oil rig or a nuclear power plant, it incurs an inherent obligation to remove the assets, and clean-up and restore the site once the asset has reached the end of its useful life. And a critical issue crystallises where such a company becomes insolvent – the clean-up liability remains attached to the asset, which may therefore become less attractive to a potential buyer, and so, if eventually the asset remains unsold, the taxpayer ends up picking up the cost of decommissioning.

This issue is the focus of a new ICAS-funded paper, Black box accounting: Discounting and disclosure practices of decommissioning liabilities, by Giovanna Michelon from the Universities of Bristol and Exeter, Mari Paananen from the University of Gothenburg and Thomas Schneider from Ryerson University.

The research considered whether accounting according to IAS 37: Provisions, Contingent Liabilities and Contingent Assets is designed and applied not only in the best interests of investors and creditors but also in those of the general public. It found that, across more than 3,000 examples of reporting in the mining, utilities and oil and gas sectors, substantial variation exists in the choice to disclose the discount rate, along with various adjustments that make comparison difficult.

To increase transparency of presentation of the costs of decommissioning and clean-up operations, and therefore also hopefully increase corporate responsibility for managing these clean-ups, the report ultimately recommends that:

  • Standard setters require disclosing the discount rates applied to facilitate comparability and allow for users of financial statements and other key stakeholders to see inside the ‘black box’ of accounting for decommissioning liabilities;
  • Preparers include and auditors demand enhanced disclosures, to include not only the discount rate but also undiscounted future estimated cash flows and timing of decommissioning activities, augmented by a comprehensive narrative on the major uncertainties surrounding these three items.

To find out more read the full report

Download report

2022-11-mitigo 2022-11-mitigo
ICAS logo

Footer links

  • Contact us
  • Terms and conditions
  • Modern slavery statement
  • Privacy notice
  • CA magazine

Connect with ICAS

  • Facebook (opens new window) Facebook Icon
  • Twitter (opens new window) Twitter Icon
  • LinkedIn (opens new window) LinkedIn Icon
  • Instagram (opens new window) Instagram Icon

ICAS is a member of the following bodies

  • Consultative Committee of Accountancy Bodies (opens new window) Consultative Committee of Accountancy Bodies logo
  • Chartered Accountants Worldwide (opens new window) Chartered Accountants Worldwide logo
  • Global Accounting Alliance (opens new window) Global Accounting Alliance
  • International Federation of Accountants (opens new window) IFAC
  • Access Accountancy (opens new window) Access Acountancy

Charities

  • ICAS Foundation (opens new window) ICAS Foundation
  • SCABA (opens new window) scaba

Accreditations

  • ISO 9001 - RGB (opens new window)
© ICAS 2022

The mark and designation “CA” is a registered trade mark of The Institute of Chartered Accountants of Scotland (ICAS), and is available for use in the UK and EU only to members of ICAS. If you are not a member of ICAS, you should not use the “CA” mark and designation in the UK or EU in relation to accountancy, tax or insolvency services. The mark and designation “Chartered Accountant” is a registered trade mark of ICAS, the Institute of Chartered Accountants of England and Wales and Chartered Accountants Ireland. If you are not a member of one of these organisations, you should not use the “Chartered Accountant” mark and designation in the UK or EU in relation to these services. Further restrictions on the use of these marks also apply where you are a member.

ICAS logo

Our cookie policy

ICAS.com uses cookies which are essential for our website to work. We would also like to use analytical cookies to help us improve our website and your user experience. Any data collected is anonymised. Please have a look at the further information in our cookie policy and confirm if you are happy for us to use analytical cookies: