Question 1

What is ASC 410-20 and how do you recognize Asset Retirement Obligations?

Accepted Answer

ASC 410-20 is the GAAP accounting standard governing Asset Retirement Obligations (ARO). Recognition requires identifying legal obligations to retire tangible long-lived assets, measuring the fair value of the liability when incurred, and recording a corresponding asset retirement cost capitalized to the related long-lived asset. ENFOS provides guidance on proper identification, measurement, and ongoing accretion calculations.

Question 2

What are ERO estimation and disclosure requirements under GAAP?

Accepted Answer

Environmental Remediation Obligations (ERO) under ASC 410-30 require estimation when an entity determines remediation is probable and costs can be reasonably estimated. Disclosure requirements include the nature of the obligation, total estimated liability, expected timing of payments, and significant assumptions used. Proper measurement follows GAAP standards including probability-weighted cost estimates.

Question 3

How do you build internal controls for environmental reserves?

Accepted Answer

Building internal controls for environmental reserves involves establishing governance frameworks for liability identification, implementing review and approval processes for cost estimates, maintaining audit trails for all assumptions and calculations, performing regular reconciliation between subledger and general ledger, and ensuring segregation of duties between estimation, review, and posting functions.

Question 4

What are the risks of using spreadsheets for environmental obligation tracking?

Accepted Answer

Spreadsheet risks in obligation tracking include formula errors, version control issues, lack of audit trails, manual data entry mistakes, limited access controls, and inability to scale across portfolios. These risks lead to material misstatements, audit findings, and regulatory non-compliance. Purpose-built subledger systems like ENFOS eliminate these risks with automated calculations and built-in controls.

Question 5

How does the COSO framework apply to environmental obligations?

Accepted Answer

The COSO internal control framework applies to environmental obligations through its five components: Control Environment (tone at top for environmental governance), Risk Assessment (identifying obligation-related risks), Control Activities (policies and procedures for estimation), Information & Communication (reporting to stakeholders), and Monitoring (ongoing evaluation of obligation management effectiveness).

Question 6

How do you integrate an environmental obligation subledger with ERP systems?

Accepted Answer

Integrating an environmental obligation subledger with ERP systems requires mapping obligation data to general ledger accounts, establishing automated journal entry feeds, synchronizing asset hierarchies between systems, implementing reconciliation controls, and maintaining audit trails across both platforms. ENFOS provides pre-built integrations with major ERP systems including SAP, Oracle, and Microsoft Dynamics.

Data-Driven Guidance for
Well-Managed Portfolios

ENFOS ROI: Environmental Remediation Obligations

Without Governed Execution, Environmental Obligation Accounting Breaks

Audit and Regulatory Scrutiny Expose Gaps in Traceability

Defensible Measurement Requires Traceable Assumptions Through Time

Segmented Ownership Undermines Governance and Control

Enterprises Lack a Complete, Structured Obligation Inventory