Accounting for the Environmental Impacts of Texaco’s Operations in Ecuador: Chevron’s Contingent Environmental Liability Disclosures
39 Pages Posted: 14 Mar 2012
Date Written: March 14, 2012
This paper examines the disclosure of a contingent legal obligation that arose as a result of Texaco Inc.’s oil drilling and extraction activities in Ecuador. We examine Texaco’s and, after Texaco’s acquisition by Chevron in 2001, Chevron’s financial reporting and SEC disclosures pertaining to a lawsuit claiming damages related to the environmental effects of Texaco’s 30 years of operations in Ecuador. After a historical review of Texaco’s drilling and extraction activities in Ecuador, and the ensuing litigation that began in 1993, we consider U.S. accounting and reporting rules as they apply to Texaco and Chevron. Given these rules, we analyze the appropriateness and timing of Chevron’s disclosures related to the heretofore-unresolved litigation. The discussion employs legitimacy and stakeholder theories to explain Chevron’s disclosures.
Keywords: Environmental Liability, Chevron, Texaco, ChevronTexaco, Financial Disclosure, Ecuador, Environmental Remediation, Legitimacy Theory, Stakeholder Theory
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