In December 2007, FASB issued a revision to Financial AccountingStatement No.141 (FAS-141R) for Business Combinations. Businesscombinations include nearly all business mergers and acquisitions.FAS-141R, which will become effective on December 15, 2008,requires that a buyer recognize all assets and liabilities(including contingent environmental liabilities) in a transactionat the "fair value." A previous FASB pronouncement, FAS 157 FairValue Measurements issued in December 2006, sets the framework formeasuring fair value. FASB defines a "contingent liability" as apresent obligation arising from past events that will requirefuture monetary outflows.

The manner in which liabilities must be recognized under FAS141R and FAS 157 are a major departure from the way environmentalliabilities were historically recognized in business combinations.The differences between the historical recognition criteria and thenew criteria are summarized in Table 1 (below).

Under the old FAS 141, accounting recognition of environmentalliabilities could be deferred until the recognition criteria forFAS 5, Accounting for Contingencies, were met. FAS 5 requiresrecognition of a liability only if (1) the loss is "probable,"meaning it is highly likely to occur and (2) can be reasonablyestimated. If a contingent environmental liability did not meeteither of these requirements it did not need to be recognized onaccounting statements or for business combinations.