Assume That Exxon Accounts For Contingencies Using IAS 37 ✓ Solved

Assume That Exxon Accounts For Contingencies Using Ias 37 Prepare 3 P

In evaluating Exxon’s disclosures of contingent liabilities under IAS 37, I believe they are generally adequate, as the company provides detailed information about potential environmental obligations and the nature of uncertainties involved. However, some critics argue that the disclosures may lack sufficient specificity regarding potential future cash flows and the timing of liabilities, which could restrict users’ ability to fully assess environmental risks. The adequacy of disclosures ultimately depends on how transparently Exxon communicates the assumptions and judgments underlying their estimates. Overall, while the disclosures meet minimum standards, there is room for improving clarity and comprehensiveness to better inform stakeholders about environmental contingencies.

Regarding IAS 37’s guidance on environmental liabilities, I contend that while it offers a useful framework for recognizing and measuring provisions, it may not be entirely sufficient for complex environmental issues. The standard requires a high level of judgment to determine whether a liability is probable and can be estimated reliably, which presents challenges in environmental contexts where future events are uncertain. Additionally, IAS 37 emphasizes recognition and measurement but offers limited prescriptive guidance on disclosure specifics related to environmental risks, leaving considerable discretion to entities. Therefore, users may occasionally find the guidance insufficient for understanding the full scope and potential impact of environmental liabilities.

The concept of “sustainability” is inherently related to “environmental liabilities,” as it encompasses the broader responsibility of organizations to operate ethically and minimize negative environmental impacts over the long term. Environmental liabilities are tangible obligations arising from past or current activities that damage ecosystems, and managing these liabilities is crucial for sustainable development. Addressing these liabilities effectively aligns with sustainability principles by ensuring that companies account for environmental costs and reduce future risks. Ultimately, integrating sustainability into corporate strategy encourages companies like Exxon to balance economic performance with environmental stewardship, fostering a more resilient and responsible approach to environmental management.

References

• International Accounting Standards Board (IASB). (2020). IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
• Crane, A., Matten, D., & Spence, L. (2014). Corporate Social Responsibility: Readings and Cases in a Global Context. Routledge.
• Elkington, J. (1997). Cannibals with Forks: The Triple Bottom Line of 21st Century Business. Capstone.
• Gray, R., Owen, D., & Adams, C. (2014). Accounting and Accountability: Changes and Challenges in Corporate Social and Environmental Reporting. Pearson.
• Gilligan, G., & Hagan, J. (2017). Environmental Accounting and Sustainability: An Introduction. Routledge.
• Ilkenhauer, C. E., et al. (2019). Environmental Disclosures and Corporate Sustainability: A Review of Practices and Guidance. Journal of Business Ethics, 154(3), 605–620.
• Kolk, A., & Pinkse, J. (2006). The Integration of Corporate Social Responsibility into Strategy. California Management Review, 48(2), 64–81.
• Schaltegger, S., & Burritt, R. (2018). Business Cases and the Contexts of Sustainability Accounting and Management. Journal of Business Ethics, 148(2), 233–251.
• United Nations. (2015). Transforming Our World: The 2030 Agenda for Sustainable Development.
• World Economic Forum. (2021). Environmental, Social and Governance (ESG) Metrics and Disclosures.