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Mail Call, 4/24/06

Location: Blogs AAO Weblog (Public)
Posted by: Jack Ciesielski	4/24/2006 6:36 AM
From Greg R., regarding a post on FIN 47 a few weeks ago: In your last entry, you state that "The total tab for these companies to adopt FIN 47/Statement 143 is pretty small: under half a billion for the 43 firms. It's not a bank-breaker. But, it is something for common shareholders to monitor going forward, as it represents a claim that should, by its very nature, grow with the passage of time - and crowd out shareholders claims, to some degree." I agree with your statement. However, I believe you are missing the big story. The items most companies are reporting as AROs only scratches the surface of what will ultimately come on to corporate balance sheets (check out the utility companies if you want to see where this is headed). FIN 47 applies to a MUCH larger range of environmental conditions with MUCH larger price tags (in the hundreds of billions of dollars). That is what investors should be worried about, not asbestos. Asbestos is essentially immaterial. What lies below the water line could cause many companies to be rendered insolvent when FIN 47 is fully implemented. I think you may have focused a bit too much on the last part of the post, Greg. What was being covered was the fact that we found 43 instances of new, previously unrecorded Statement 143 liabilities as a result of firms being jabbed by FIN 47 - and that it was surprising how many of them were real estate or retail oriented and connected to asbestos. I wasn't trying to imply that FIN 47 was somehow asbestos-specific, and if anyone else got this idea - stop. Click back to the previous posts on FIN 47 and how it energizes Statement 143, and I think you'll see that we're on the same page as far as what Statement 143 is all about. (And keep in mind that Statement 143 is the real "gorilla standard" when it comes to asset retirement obligations, not FIN 47.) Keep watching this space for more on FIN 47. I've talked about companies with new Statement 143 obligations as a result of FIN 47. We've got more to share with you soon about firms who've increased their existing asset retirement obligations because of FIN 47.

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