FASB Offers Guidance for Conditional Asset Retirement Obligations

The Financial Accounting Standards Board (FASB) has published an Exposure Draft, Accounting for Conditional Asset Retirement Obligations, an Interpretation of FASB Statement No. 143, in response to the diverse accounting practices that have developed with respect to the timing of liability recognition for conditional asset retirement obligations. The proposal seeks to provide more consistent recognition of liabilities relating to asset retirement obligations and more information about future cash outflows relating to these obligations.

The exposure draft clarifies that a legal obligation to perform an asset retirement activity that is conditional on a future event is within the scope of Statement No. 143. Under the Board’s proposal, an entity would be required to recognize a liability for the fair value of an asset retirement obligation that is conditional on a future event if the liability’s fair value can be estimated reasonably. The ability of an entity to indefinitely defer settlement of the obligation or the ability of an entity to sell the asset prior to its retirement does not relieve an entity of the obligation. Uncertainty surrounding the timing and method of settlement that may be conditional on events occurring in the future would be factored into the measurement of the liability rather than the recognition of the liability. The proposal would be effective no later than the end of the fiscal years ending after December 15, 2005 (December 31, 2005 for calendar-year enterprises).

The comment period for the exposure draft ends August 1, 2004. The document is available on the FASB’s website at www.fasb.org.

FASB Board member George Batavick, who serves as the Board collaborator on the project, said: “This interpretation improves financial reporting by adding consistency to the recognition and measurement of asset retirement obligations.”

You may like these other stories...

Credit Suisse says pension assets at risk unless court delays sentencingJohn Letzing of the Wall Street Journal reported on Wednesday that Credit Suisse Group AG says its management of billions of dollars in assets for...
The prospect of International Financial Reporting Standards (IFRS) being fully adopted in the United States in the near future are growing less likely, as the Financial Accounting Standards Board (FASB) and the International...
House proposes $10.5B, eight-month highway billThe House Ways and Means Committee proposed a transportation funding bill on Tuesday that calls for a temporary extension of current transportation funding levels until May 31,...

Upcoming CPE Webinars

Jul 16
Hand off work to others with finesse and success. Kristen Rampe, CPA will share how to ensure delegated work is properly handled from start to finish in this content-rich one hour webinar.
Jul 17
This webcast will cover the preparation of the statement of cash flows and focus on accounting and disclosure policies for other important issues described below.
Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.