Twisting the Contingency Rules to Save the Environment You are a member of an environmental group that is working to clean up Valley River, which runs through your town. Right now, the group is focusing on forcing Allied Industrial, a manufacturer with a large plant located on the river, to conduct its operations in a more environmentally friendly way.
The leader of your group, Frank Bowers, is a political science major at the local university.
Frank discovers that Allied Industrial is involved in ongoing litigation with respect to toxic waste cleanup at 13 factory sites in other states. Frank is shocked to learn that Allied itself estimates that the total cost to clean up the toxic waste at these 13 sites could be as much as $140 million yet has not reported any liability on its balance sheet. Frank found this information buried in the notes to Allied Industrial’s financial statements.
Frank is convinced that he has found a public relations tool that can be used to force Allied Industrial to clean up Valley River. He has called a press conference and plans to accuse Allied of covering up its $140 million obligation to clean up the toxic waste at the 13 sites. His primary piece of evidence is the fact that the $140 million obligation is not mentioned anywhere in Allied’s primary financial statements.
You have taken a class in accounting and are somewhat troubled by Frank’s interpretation of Allied’s financial statement disclosures. You look at Allied’s annual report and see that it does give complete disclosure about the possible obligation although it does not report the $140 million as a liability. The report also states that, in the opinion of its legal counsel, it is possible but not probable that Allied will be found liable for the $140 million toxic waste cleanup cost.
The press conference is scheduled for 3 P.M. What should you do?