 GUIDA, SLAVICH & FLORES, P.C. FINANCIAL DISCLOSURE OF ENVIRONMENTAL LIABILITIES BROWNFIELDS 2004 – St. Louis, Missouri September 2004 Greg Rogers, J.D., CPA

The Balance of Pain Going to Market Mothballing

The New Balance of Pain Going to Market Mothballing FAS 143 SOX 404

The Death of Mothballing SOX 404 FAS 143

Asset Retirement Obligations –Legal obligations associated with the retirement of long-lived assets and arising from the acquisition, construction, and/or normal use of the asset Examples of environmental AROs –asbestos containing building materials –soil and groundwater contamination New Interpretation covers “conditional AROs” If not FAS 143, then FAS 144

SOX Internal Control Internal control –Processes to give “reasonable assurance” that financial statements are reliable –Process required to identify/estimate AROs Independent attestation –Financial auditor must give opinion –Design and operational effectiveness –Cannot rely on “audit inquiry letters”

The One, Two Punch FAS 143 Enforceable legal obligations Unasserted claims Not covered by audit inquiry letters Cleanup costs are an ARO for owned and capital lease assets SOX 404 Duty to estimate Independent process verification Auditors cannot allow mothballing No SEC involvement required

The PAIN of Mothballing Section 404 audit failure –Significant deficiency –Material weakness Shareholder litigation Uninsured D&O claims

Timeline Section 404 –Nov. 15, 2004 (market cap > $75 million) –July 15, 2005 (market cap < $75 million) FAS 143 –June 15, 2003 (initial standard) –Dec. 15, 2005 (interpretation)

Role of Government Cleanup laws create AROs Publicize the “duty to estimate” Promote brownfield programs to ease the PAIN

THE END RIP Mothballing