Accounting and long-tail liabilities: the case of asbestos. Research Report 130
Long-tail liabilities arising from occupational and environmental exposure to toxic products from the mining and manufacturing industries creates a ‘manufactured uncertainty’ for corporations (Michaels and Monforton 2005). These toxic products include tobacco, beryllium, benzene, chromium, lead, pharmaceuticals and, importantly, asbestos. Asbestos provides a unique case of a long-tail liability because asbestosis and mesothelioma are both sequelae (pathological consequences) of asbestos exposure with long latency periods that exacerbate uncertainty about the timing and amount of workers’ compensation and product liability claims.
The increasing incidence of asbestos-related disease globally and the potential inadequacy of extant corporate reporting regimes to disclose asbestos-related corporate social responsibility information to stakeholders are under-researched. The increasing quantum and nature of claims require policymakers and regulators to provide appropriate mechanisms for reporting and ensuring appropriate provisioning for current and future asbestos claims. The asbestos case study provides a foundation for the development of accounting practices for long-tail liabilities from occupational and environmental exposure to toxic products more generally.
The aim of this research is to conduct a case study of the corporate disclosures relating to the uncertainty arising from long-tail liabilities, focusing on the asbestos industry in Australia. The interaction of financial uncertainty arising from asbestos liabilities with the consequences of a period of economic downturn provides a window for exploring corporate disclosures, both financial and narrative.
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