Pollution remediation costs:

Question

Quizplus · Accepted Answer

Pollution remediation costs are to be accrued as a liability in the basic financial statements, as they represent an obligation to take action in the future to remediate a pollution problem that has occurred in the past. This is in accordance with the accrual basis of accounting, which requires that expenses and liabilities be recognized when they are incurred, regardless of when the cash is paid out.

Option B is incorrect because pollution remediation costs are not recorded as expenses if they will be paid from current resources, as this would not accurately reflect the current state of the liability. Option C is also incorrect because the fact that the government did not operate the site does not absolve it of responsibility for any pollution that occurred there.

Pollution Remediation Costs