An examination of environmental disclosures in 10K reports and GAAP compliance

This study examines the extent to which Fortune 500 firms disclose environmental liability information required by Generally Accepted Accounting Principles. The study also examines whether firms expanded voluntary environmental disclosure in response to Statement of Position 96-l. Finally, the study examines factors influencing the level of mandatory environmental disclosure.; The study examines three research questions: (1) To what extent do firms disclose mandatory environmental liability information in 10Ks? (2) Have firms increased the level of voluntary environmental disclosure in 10Ks in response to Statement of Position 96-1? and (3) Are firm characteristics associated with the amount of mandatory environmental disclosure in 10Ks?; The study uses data from COMPUSTAT, 10Ks, and the Superfund Public Information System for years 1991–1997. Descriptive statistics summarize the environmental disclosure practices of sample firms. Paired differences t-tests reveal whether voluntary disclosures have increased. The empirical test examines whether the extent of mandatory environmental disclosure is associated with four factors: (1) size, (2) profitability, (3) industry, and (4) regulatory influence.; The study shows that firms decreased the percentage of mandatory environmental disclosure from 1993–1997, and much discretion exists with respect to environmental disclosure. The findings reveal that firms increased the level of certain voluntary disclosures in response to Statement of Position 96-1; however, firms did not disclose most of the eight disclosure items encouraged by Statement of Position 96-1. Finally, empirical results indicate that the level of mandatory environmental disclosure is associated with size, profitability, industry, and regulatory influence.; Policy implications indicate that the Securities and Exchange Commission must improve monitoring and enforcement efforts designed to promote adequate recognition and disclosure related to environmental liabilities. In addition, the Financial Accounting Standards Board must reevaluate the sufficiency of standards related to environmental liabilities.