Asset Retirement and Environment Flashcards
When does an environmental liability need to be accrued?
When the liabilities are both probable and reasonably estimable.
List the components of asset retirement obligation (ARO) costs.
Costs to dismantle, reclaim, remove, etc.
How is the annual accretion expense and corresponding increase to asset retirement obligation (ARO) found?
Multiplying the interest rate used in capitalizing the initial amount, by the beginning balance in the ARO.
How much is capitalized to the asset retirement obligation?
The present value of the estimated future payments (initial fair value).
What happens to the net book value of the asset?
Depreciated or depleted.
What amount does the asset retirement obligation increase over time?
The final amount expected to be paid.
What is the best description of accretion expense associated with an asset retirement obligation?
Growth in asset retirement obligation. Accretion expense is simply the increase in the asset retirement obligation over time.
