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. Assume a private enterprise adopts ASPE for the calendar year 2011. ii. This article explains the provisions of Statement no. An example of accounting for an Asset Retirement Obligation. Earlier adoption is permitted. The decision tree in the Appendix provides a summary of the recognition criteria under IFRS. An asset retirement obligation (ARO) is a legal obligation that is associated with the retirement of a tangible, long-term asset. Under ASPE, an asset retirement obligation must be legally required to be recognized. enterprises (“ASPE”) Section 1521, ... Asset retirement obligations Other financial liabilities Equity shall be presented in accordance with the requirements of Section 3251, Equity. Explanation. 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. h�bbd```b``���3��VɲD21�HV%0V��.��&�Et��� 6GDfp��Y`�H2.����E@$_��?o3�:�P�L�?ÿ�o 0@Z ASPE. 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. 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. The lessee constructs a concrete base to support and attach equipment to the land (i.e., the equipment is effectively immoveable). We'll also show examples from cases and … An asset retirement obligation (ARO) is a legal obligation that is associated with the retirement of a tangible, long-term asset. At its meeting on March 22-23, 2018, the PSAB approved the final Handbook Section PS 3280, "Asset Retirement Obligations". $55 10 April 2018, 8:00 PM. Understanding ASPE Section 1521, Balance Sheet | 3 To learn more about these items or 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) Asset-retirement obligations ASPE retains the same requirements for recording an asset-retirement obligation as those in the current Handbook, except that the measurement has been simplified. 7. 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 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. Thank you! 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. 12 Reserve for amount not due Section 22 election on transfer of receivables as from MGMT 2000 at Brock University 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). Visit: https://www.farhatlectures.com To access resources such as quizzes, power-point slides, CPA exam questions, and CPA simulations. In accounting, an asset retirement obligation (ARO) describes a legal obligation associated with the retirement of a tangible, long-lived asset, where a … Under ASPE, an asset retirement obligation should be recognized when a) an asset is impaired and is available for sale. 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 Obligation, Accretion Expense Amount of accretion expense recognized in the income statement during the period that is associated with asset retirement obligations. This new Section will be effective for fiscal years beginning on or after April 1, 2021. Asset Retirement Obligation is a legal and accounting requirement, in which a company needs to make provisions for the retirement of a tangible long-lived asset in order to bring the asset back to its original condition after the business is done using the asset. The interest rate used for discounting is the risk-free rate adjusted for the effect of the entity’s credit standing. Understanding ASPE Section 1521, Balance Sheet | 3 To learn more about these items or for application guidance, please contact our Private Mid-Market practice at privatecompanyinfo@ca.ey.com. 1185 0 obj <> endobj We have updated this Financial reporting developments (FRD) publication to reflect the issuance of Accounting Standards Update (ASU) 2019 … The accounting for these obligations is covered under FASB ASC 410, or Accounting Standards Codification Statement No. It is generally applicable when a company is responsible for removing equipment or cleaning up hazardous materials at some agreed-upon future date. If you find this article useful, please share it with your friends. Asset retirement obligation. Asset Retirement Obligations Existing standards require initial measurement of asset retirement obligations at fair value and provide detailed guidance on how this fair value should be estimated. Asset retirement obligations essentially must be accounted for as follows. - Goodwill - Understand how to account for goodwill under ASPE . adms 3595 solutions to self practice questions exercise classifications on balance sheet prepared under aspe: current financial liability. This comes with a $500,000 estimated cost to replant. (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. An asset retirement obligation (ARO) is 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, statute, ordinance or written or oral contract or The liability is commonly a legal requirement to return a site to its previous condition. 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. 8. (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. current asset. IFRIC 1 - If the adjustment results in an addition to the cost of the asset The entity should consider whether this is an indication that the new carrying amount of the asset may not be fully recoverable - in which case impairment test is necessary. principle which includes asset retirement obligations, whereas IFRS 3 does not explicitly allow for an exception for asset retirement obligations. An Asset Retirement Obligation (ARO) is a legal obligation associated with the retirement of a tangible long-lived asset in which the timing or method of settlement may be conditional on a future event, the occurrence of which may not be within the control of the entity burdened by the obligation. This includes rental property and property that is being used for administrative purposes. 7 Deloitte earning Academy ourse catalogue or accounting proessionals ��`�10�371�fyâ���bü�%��;�..U�w�M����f8�碔��S����-)[h�i2��� iF6. • 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. At the end of the 5 years, Quality is contractually obligated to replant trees on the land. Issuu is a digital publishing platform that makes it simple to publish magazines, catalogs, newspapers, books, and more online. endstream endobj 1186 0 obj <>/Metadata 53 0 R/Outlines 74 0 R/PageLayout/OneColumn/Pages 1181 0 R/StructTreeRoot 139 0 R/Type/Catalog>> endobj 1187 0 obj <>/ExtGState<>/Font<>/XObject<>>>/Rotate 0/StructParents 0/Type/Page>> endobj 1188 0 obj <>stream For example, certain obligations, such as nuclear decommissioning costs, generally are inc urred as the asset is operated. major ASPE projects since the introduction of the accounting framework. 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 A business must recognize an asset retirement obligation for a long-lived asset at the point an obligating event takes place—provided it can reasonably estimate its fair value (or at the earliest date it can make a reasonable estimate). The estimated residual value of the depot is zero. 1-888-987-0858. 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. Full Webinar + Note Package Provided. The entire disclosure for an asset retirement obligation and the associated long-lived asset. AND. 6. COMMENCEMENT OF DEPRECIATION 514.5. It is generally applicable when a company is responsible for removing equipment or cleaning up hazardous materials at some agreed-upon future date. FASB Statement no. 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. These are the only exemptions allowed and an entity cannot apply them by analogy to other items. Related party transactions (see paragraph 1500.25). Asset Retirement Obligations. Entities at the same time must recognize an offsetting asset retirement cost by increasing the carrying amount of the related long-lived asset. Issue #3 – Asset Retirement Obligation Under ASPE and IFRS, the treatment of Asset Retirement Obligation (ARO) are different. These exemptions may only be applied once, i.e., on first-time adoption. Asset Retirement Obligations - PSAB; Mar 22, 2018. The Property, plant, equipment and other assets guide discusses the accounting for acquisition transactions determined to be asset acquisitions under US GAAP. - 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. If you find this article useful, please share it with your friends. ARO is a legal obligation associated with the retirement of a tangible capital asset. ���V��,���j���oD#/@� x�f� 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. However, under both standards the present value of the estimated future cash flows must be determined. Examples of what’s in: • Removal of Asbestos • Retirement of x-ray machines • Boilers • Leased site restoration • Landfill closure / post-closure 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. Legal obligations 7 Only legal obligations, including obligations created by promissory estoppel, are in scope of this standard. LIFE AND USEFUL LIFE 514.3. Register Now. Asset Retirement Obligation is a legal and accounting requirement, in which a company needs to make provisions for the retirement of a tangible long-lived asset in order to bring the asset back to its original condition after the business is done using the 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�*. Trusted And Used By: Contact Us: support@prepformula.com. An example of accounting for an Asset Retirement Obligation. The principles are almost identical, but there are some differences – therefore, please be careful when preparing your financial statements under both standards. 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