Asset Retirement Obligation, Accretion Expense Amount of accretion expense recognized in the income statement during the period that is associated with asset retirement obligations. Section 3462 Employee Future Benefits was issued, along with a revised definition of discontinued operations in Section 3475 Disposal of Long-Lived Assets and Discontinued Operations. Provisions, Contingent Liabilities and Contingent Assets IAS 37 Provisions, Contingent Liabilities and Contingent Assets IAS 37 Definitions A legal obligation is an obligation that derives from: a contract, legislation, or other operation of law A constructive obligation is an obligation that derives from an entity's actions where: by an established… AND. ii. ARO is a legal obligation associated with the retirement of a tangible capital asset. Understanding ASPE Section 1521, Balance Sheet | 3 To learn more about these items or • apply the disclosure requirements for asset retirement obligations under ASPE Asset Retirement Obligations under ASPE Type e-learning Prerequisite knowledge Working knowledge of Part V Canadian GAAP Length 30 minutes Course number E-ASPE106e. 410. For subsequent measurement of contingent consideration, Section 1582 states that it will be re-measured when the ‘contingency is resolved’, while under IFRS Full Webinar + Note Package Provided. - Goodwill - Understand how to account for goodwill under ASPE . Courses. Asset retirement obligation/decommissioning cost broadly refers to the amount that a company expects to incur in disposing of the asset and reversing modifications made to the installation site. Introducing, the CPA PEP ASPE/IFRS Asset Retirement Obligations Review – covering the most tested Financial Reporting competency topic: AROs. Accounting for Asset Retirement obligation requires to recognize the present value of the expected retirement expenses to be recognized as a liability and fixed asset. h��Vmo�0�+���w;�Ф�l0�n��4�ChM��U���sw�Ӵt�o�:���|w~�T*�2����)��9⚥� ��C�2#KL��gRX���2(� �n��l6͛������۱N��]u�*. 1185 0 obj <> endobj The obligation is recognized at the best estimate of the amount required to settle the obligation at the balance sheet date. METHOD OF DEPRECIATION 514.4. (a) An asset retirement obligation represents a liability for the legal obligation associated with the retirement of a tangible, long-lived asset that a service company is required to settle as a result of an existing or enacted law, statute, ordinance, or written or oral contract, or by legal construction of a contract under the doctrine of promissory estoppel. Can be legislated, contractual or created by promissory estoppel. Trusted And Used By: Contact Us: support@prepformula.com. Accretion expense measures and incorporates changes due to the passage of time into the carrying amount of the liability. The entire disclosure for an asset retirement obligation and the associated long-lived asset. 3110 - Asset retirement obligation.03 - Definition.05 - Recognition - asset retirement obligation.09 - Measurement.10 - Best estimate.14 - PV technique is best.16 - Recognition - asset retirement cost.19 - Subsequent measurement The lessee constructs a concrete base to support and attach equipment to the land (i.e., the equipment is effectively immoveable). Legal obligations 7 Only legal obligations, including obligations created by promissory estoppel, are in scope of this standard. Asset retirement obligations are legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of such assets. The Property, plant, equipment and other assets guide discusses the accounting for acquisition transactions determined to be asset acquisitions under US GAAP. Accounting for Asset Retirement Obligation. Entities recognize a liability for an asset retirement obligation when incurred if its fair value reasonably can be estimated. REALpac ASPE/April 2011 April 2011 On behalf of the members of the Real Property Association of Canada (REALpac), we are pleased to offer the first edition of the REALpac Accounting ... ASSET RETIREMENT OBLIGATIONS 514. Full Package; And, if you have any questions, please comment below. 8. One of the many nuances of lease accounting, an asset retirement obligation (ARO) is a liability related to the retirement of a tangible long-lived asset when the timing or method of settlement might be dependent upon a future event. Asset Retirement Obligations. Examples of what’s in: • Removal of Asbestos • Retirement of x-ray machines • Boilers • Leased site restoration • Landfill closure / post-closure LIFE AND USEFUL LIFE 514.3. Intangible Assets; Asset Retirement Obligations; Stock Base Compensation; Differential Options; The article explains that "ASPE must be adopted on a retrospective basis. Under IFRS, the increase in the carrying value of the decommissioning liability due to the passing of time is recorded as interest expense (borrowing cost), but under ASPE, this is not permitted. At its meeting on March 22-23, 2018, the PSAB approved the final Handbook Section PS 3280, "Asset Retirement Obligations". ii. The present value of dismantling the equipment on June 1, 2017 will be $1,648,890 (see Appendix 3a). endstream endobj startxref 3061 Property, Plant and Equipment, Section 3064 Goodwill and Intangible Assets and Section 3110 Asset Retirement Obligations in Part II of the CPA Canada Handbook – Accounting – ASPE, except for guidance included in Sections 4433 and 4434 related to items such as contributed assets and write-downs of assets. FASB Statement no. h�b```�e���� ��ea���� �r01l�mv�ʿ�� ������0d�s�၀� ��ݻw�ؑ �`��t�VK��iǮ[pl�֝y8K0�[�q���o���p]}3�t@w���s�^=���"�I72HĝN+ �-����P��,@f:��f���L`&;�����h��Z��2�� - 143, Accounting for Asset Retirement Obligations— which was seven years in the making—shifts to a balance-sheet approach, requiring businesses to recognize a liability for a retirement obligation when they incur it—even if that is far in advance of the asset’s planned retirement. It is generally applicable when a company is responsible for removing equipment or cleaning up hazardous materials at some agreed-upon future date. The principles are almost identical, but there are some differences – therefore, please be careful when preparing your financial statements under both standards. Asset retirement obligations essentially must be accounted for as follows. Similar to asset retirement obligation covered under ASPE 3110 Decommissioning/restoration is recognized as a Liability (per IAS 37 – provisions); and As part of Property, Plant and Equipment (IAS 16) - Amortization - We'll review various amortization methods for depreciating capital assets under ASPE - Asset Retirement Obligations - Learn how to record asset retirement obligation assets and liabilities and amortize them over the life of the related asset. This new Section will be effective for fiscal years beginning on or after April 1, 2021. Tags In. from discounting) is recognized as, The changes to the liability recognized due to changes in the cash flows are adjusted to the liability and the long-term asset the ARO applies to, ARO Is covered under IAS 37 (Provisions) and IAS 16 (PPE). Liability, dr. long-lived assets), The ARO that is recognized as a long-lived asset is amortized over the useful life of that long-lived asset, The changes to the liability recognized due to the passage of time (i.e. 4.7 (23) Let's discuss Asset Retirement Obligations from the standpoint of ASPE and IFRS. The guide also discusses the capitalization of costs, such as construction and development costs and software costs, as well as the subsequent accounting for PP&E, including impairments, depreciation and amortization, and asset … Assume a private enterprise adopts ASPE for the calendar year 2011. asset retirement obligation relating to an asset of others, it is a liability but not an asset retirement obligation for the purposes of this standard. Were acquired, purchased or built with the intention of using the assets for business purposes. Generally-accepted accounting standards (GAAP) require the company to include the present value of the expected (face value of) future decommissioning cost in the total acquisition cost of the asset. However, under both standards the present value of the estimated future cash flows must be determined. An asset retirement obligation is a legal obligation associated with the permanent removal of a long-lived asset from service. Asset retirement obligations (see paragraph 1500.24). 7. REALpac Members remain firmly committed to maintaining the currency and relevance of the REALpac ASPE Handbook to the evolving requirements of our industry, and in ensuring its consistency with GAAP established by the AcSB. If you find this article useful, please share it with your friends. The principles are almost identical, but there are some differences – therefore, please be careful when preparing your financial statements under both standards. 6. An example of accounting for an Asset Retirement Obligation. Under ASPE, an asset retirement obligation must be legally required to be recognized. They were granted access to the timber resources on the land for 5 years. Issue #3 – Asset Retirement Obligation Under ASPE and IFRS, the treatment of Asset Retirement Obligation (ARO) are different. IP Week 5 Quality Cabinets Inc. (ASPE) Asset Retirement Obligation - ASPE 3110 Issue Quality obtained an operating lease of land from the government for 5 years. Moderate: 30-35 E13-16: Asset retirement obligation. enterprises (“ASPE”) Section 1521, ... Asset retirement obligations Other financial liabilities Equity shall be presented in accordance with the requirements of Section 3251, Equity. It is generally applicable when a company is responsible for removing equipment or cleaning up hazardous materials at some agreed-upon future date. An asset retirement obligation (ARO) is a legal obligation that is associated with the retirement of a tangible, long-term asset. The accounting for these obligations is covered under FASB ASC 410, or Accounting Standards Codification Statement No. IP Week 5 Quality Cabinets Inc. (ASPE) Asset Retirement Obligation - ASPE 3110 Issue Quality obtained an operating lease of land from the government for 5 years. 1208 0 obj <>/Filter/FlateDecode/ID[<15DF5BA0C6DE3641A637E308656C83B1><28181B771F1E2A4DBF1624B9D263F318>]/Index[1185 36]/Info 1184 0 R/Length 110/Prev 343083/Root 1186 0 R/Size 1221/Type/XRef/W[1 3 1]>>stream We have updated this Financial reporting developments (FRD) publication to reflect the issuance of Accounting Standards Update (ASU) 2019 … (ex: If asset value is $100,000 and the obligation reduced by $150,000, would recognize a profit of $50,000 in the P&L. The liability is commonly a legal requirement to return a site to its previous condition. Under both ASPE and IFRS, an obligation is recognized depending on the likelihood of the outflow of resources to settle the obligation and on the ability to reasonably determine the amount of the outflow. The majority of the Exposure Draft respondents supported this approach. 1-888-987-0858. The estimated residual value of the depot is zero. ASPE, as determined by the AcSB, to provide readers with a one stop source of ASPE accounting for real estate. November 22, 2018 An asset retirement obligation (ARO) is a liability associated with the eventual retirement of a fixed asset. ASPE. The interest rate used for discounting is the risk-free rate adjusted for the effect of the entity’s credit standing. This publication is designed to assist professionals in understanding the … %%EOF AND. Thank you! DEPRECIATION 514.2. For subsequent measurement of contingent consideration, Section 1582 states that it will be re-measured when the ‘contingency is resolved’, while under IFRS Thank you! enterprises (“ASPE”) Section 1521, ... Asset retirement obligations Other financial liabilities Equity shall be presented in accordance with the requirements of Section 3251, Equity. RECOGNITION ASSET RETIREMENT OBLIGATION • A legal obligation associated with the retirement of a tangible long-lived asset that an entity is required to settle as a result of an existing or enacted law, statue, ordinance or written or oral contract or by legal construction or a contract under the doctrine of promissory estoppels. Asset retirement obligation. Moderate: 40-50 E13-17: Unearned revenue: Simple: 10-15 E13-18: Deposits, HST and ARO: Moderate: 10-15 E13-19: Warranties – assurance-type and cash basis. Legal obligations 7 Only legal obligations, including obligations created by promissory estoppel, are in scope of this standard. Asset Retirement Obligations - PSAB; Mar 22, 2018. 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