FASB Issues Final Interpretation on Accounting for Conditional Asset Retirement Obligations

Norwalk, CT, March 30, 2005—Today, the Financial Accounting Standards Board (FASB) published FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations. Interpretation 47 will result in (a) more consistent recognition of liabilities relating to asset retirement obligations, (b) more information about expected future cash outflows associated with those obligations, and (c) more information about investments in long-lived assets because additional asset retirement costs will be recognized as part of the carrying amounts of the assets.

Interpretation 47 clarifies that the term conditional asset retirement obligation as used in FASB Statement No. 143, Accounting for Asset Retirement Obligations, refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement. Uncertainty about the timing and (or) method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. Interpretation 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation.

Interpretation 47 is effective no later than the end of fiscal years ending after December 15, 2005 (December 31, 2005, for calendar-year enterprises).  Retrospective application of interim financial information is permitted but is not required. Early adoption of this Interpretation is encouraged.

The full text of the Interpretation is currently available on the FASB’s website. Copies of Interpretation 47 are scheduled to be available in April 2005, through the FASB Order Department at 800-748-0659 or by placing an order on the FASB website at

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