Some New Evidence on the Effectiveness of Authoritative Environmental Reporting Guidance

Abstract

This research investigates whether authoritative guidance regarding financial statement disclosures is incorporated into practice as envisioned by the promulgating body. Such assimilation is important from the standpoint of corporate accountability reporting as well as development of greater transparency in the extant accounting model. Specifically, we empirically test whether American Institute of Certified Public Accountants Statement of Position 96-1 led to improved reporting of environmental remediation costs and liabilities.

A repeated-measures design was used to assess the level of disclosure by 126 large U.S. firms, each of which had been identified by the Environmental Protection Agency as being potentially responsible for the cost of cleanup efforts at multiple Superfund sites. By performing a content analysis of the pre- and post-issuance annual reports of these companies, a disclosure score was derived for each. Comparison of disclosures in the two fiscal periods following the effective date of this new guidance with the pre-issuance reporting shows no overall enhancement or improvement in either the level or quality of disclosures. We conclude that when viewed from the perspective of the two years subsequent to its effective date the promulgation of this additional authoritative reporting and display guidance did not attain the espoused objective.

Citation

Freedman, M. and Stagliano, A.J. (2007), "Some New Evidence on the Effectiveness of Authoritative Environmental Reporting Guidance", Lehman, C.R. (Ed.) Envisioning a New Accountability (Advances in Public Interest Accounting, Vol. 13), Emerald Group Publishing Limited, Leeds, pp. 1-15. https://doi.org/10.1016/S1041-7060(07)13001-7