Business Procedures Manual

Fiscal Affairs Division

7.14 Pollution Remediation

7.14 Pollution Remediation

(Last Modified on September 29, 2022)

Normally pollution remediation costs will be expensed when the liability is recognized; however, paragraph 22 of GASB 49 provides specific instances where pollution remediation expenditures should be capitalized when goods and services are required for any of the following circumstances:

  1. To prepare the property in anticipation of sale. Institutions should only capitalize amounts necessary to place asset into its intended use and condition. Capitalized amounts should not exceed estimated fair value.

  2. To prepare the property (with known or suspected pollution that would require remediation) for use when the property was acquired. Capitalization should be limited to outlays expected to be necessary to place the asset into its intended location and condition for use.

  3. To perform pollution remediation that restore a pollution caused decline in service utility for an impaired asset.

  4. To acquire property, plant and equipment that have a future alternative use.

For items (1) and (2) above, capitalization is only appropriate if the outlays take place within a reasonable period prior to the expected sale for item (1) or prior to use for item (2). Capitalization is also appropriate if outlays are delayed and the delay is beyond the institutions control.

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