Asset Retirement Obligations
SFAS 143, June 2001
“Accounting for Asset Retirement Obligations”
“Accounting for Asset Retirement Obligations”
AICPA SOP 96-1
“Environmental Remediation Liabilities”
“Environmental Remediation Liabilities”
Asset retirement obligation
–> an obligation related with the retirement of a tangible long-lived asset
Asset retirement cost
–> an increase in the carrying amount of long-lived assets
–> due to the recognition of an asset retirement obligation as a liability
–> due to the recognition of an asset retirement obligation as a liability
Initial recognition and measurement
1. If a reasonable estimate of fair value can be made
–> a liability is recognized for an asset retirement obligation
–> when it incurred
–> a liability is recognized for an asset retirement obligation
–> when it incurred
2. If a reasonable estimate is not available when it incurred
–> a liability is recognized
–> when a reasonable estimate can be made
–> a liability is recognized
–> when a reasonable estimate can be made
3. To estimate the fair value of a liability
–> “expected present value technique” is used
–> “expected present value technique” is used
4. “Credit-adjusted risk-free rate” is used
–> to discount the expected cash flows
–> to discount the expected cash flows
Subsequent measurement
1. Step 1: Measure the changes in the liability
–> due to the passage of time
–> apply “interest method”
–> due to the passage of time
–> apply “interest method”
2. Step 2: Measure the changes in the liability
–> due to a revision of estimated cash flows
–> due to a revision of estimated cash flows
Environmental Obligations
Codification Topic 410-30
AICPA SOP 96-1, “Environmental Remediation Liabilities”
AICPA SOP 96-1, “Environmental Remediation Liabilities”