NEWS RELEASE 07/05/01
FASB Issues Standard on Accounting for Asset Retirement Obligations
Norwalk, CT, July 5, 2001—At the end of June, the Board concluded deliberations and unanimously voted to issue Statement No. 143, Accounting for Asset Retirement Obligations. Initiated in 1994 as a project to account for the costs of nuclear decommissioning, the Board expanded the scope to include similar closure or removal-type costs in other industries that are incurred at any time during the life of an asset.
That standard requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement.
The standard is effective for fiscal years beginning after June 15, 2002, with earlier application encouraged. The Statement will be published in July, and an announcement of its availability will be made through a press release and notice on this website.
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Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors, and others rely heavily on credible, transparent, and comparable financial information. For more information about the FASB, visit our website at www.fasb.org.
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