FASB Issues Final Interpretation of Accounting for Conditional Asset Retirement Obligations

The Financial Accounting Standards Board (FASB) on Wednesday published FASB No. 47, Conditional Asset Retirement Obligations. Interpretation No. 47, clarifies that the term “conditional asset retirement obligations” as used in FASB Statement No. 143, Accounting for Asset Retirement Obligations, refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and/or method of settlement. Uncertainty about the timing and/or method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. Interpretation No. 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of as asset retirement obligation.


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Interpretation No. 47 is effective no later than the end of fiscal years ending After December 15, 2005 (December 30, 2005 for calendar-year enterprises). Retrospective applications of interim financial information is permitted but not required. Early adoption of Interpretation No. 47 is encouraged.

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