Memo
Autor: Sharon • January 25, 2018 • 890 Words (4 Pages) • 646 Views
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possible loss or a statement that such an estimate cannot be made. As such, Classic Ceramics should present the circumstances and facts surrounding the Twin Falls facility in the disclosure. They should also disclose that they will be partially responsible for the RI/FS costs that will range from $600,000 to $1.8 million, but that they cannot reasonably estimate their share of that amount. They should also disclose that there may be additional cleanup costs after the conclusion of the RI/FS, but that there is currently no indication of what these costs will be.
Before issuing an opinion on Classic Ceramics’ financial statements, we will require a management representation letter detailing the circumstances of the EPA investigation. Management must confirm that they have evaluated all available information, and they still cannot reasonably estimate their share of any potential remediation costs. We will also require management to confirm that the information they gave us during our meeting was complete and accurate, and that there have been no significant changes since that time.
After reviewing the circumstances and pertinent facts, we do not believe that the EPA investigation should affect our opinion on the financial statements. The company is not required to accrue any liability related to the investigation at this time because the amount of any such liability is not reasonably estimable. With the information currently available, we also do not believe that such a liability would be material to the financial statements. As of now, the only remediation cost that Classic Ceramics is likely to be liable for is a portion of the RI/FS cost, which is expected to range from $600,000 to $1.8 million. Although we do not know the exact cost allocation method that will be used, the facts suggest that most of the lead contamination occurred before Classic Ceramics occupied the site, and all other PRP’s have been identified as viable companies who will be able to meet their obligations. Based on these circumstances, we do not foresee Classic Ceramics being liable for a majority of the costs, and their portion of the RI/FS costs will likely fall below the materiality threshold of $1 million.
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