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In the Exxon Valdez disaster, the oil laden ship ran aground in Prince William Sound in Alaska, creating an economic and environmental disaster for the

In the Exxon Valdez disaster, the oil laden ship ran aground in Prince William Sound in Alaska, creating an economic and environmental disaster for the region and for Exxon, who was responsible for damages and all of the costs of remediation, totaling about $5 billion. Some in the media argued that because oil tankers travel through some of the most dangerous waters in the world, Exxon should have accrued losses and an estimated liability over many previous years in anticipation of just such a disaster.

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Was Exxon derelict in its accounting for this disaster? Why or why not? What would be the impact on common debt ratios in those previous years had Exxon accounted for the liability in the past as sought by some of the media?

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