Case Study Fasb Codification
FASB Codification/ARO Case
1. According to FASB the asset retirement obligation should be recorded in the period in which the liability meets FASB’s definition of a “probable future sacrifice of economic benefits arising from a present obligation,” and in which its amount can be reasonably measured. Uncertainty with respect to the timing or method of settlement that is conditional on future occurrences does not affect the recognition of the liability but may be factored into its measurement.
The obligation is to be recorded at fair value, which represents the amount that a third party would require to assume the liability. If an active market for these obligations does not exist, the company must use the expected present value technique
1. According to FASB the asset retirement obligation should be recorded in the period in which the liability meets FASB’s definition of a “probable future sacrifice of economic benefits arising from a present obligation,” and in which its amount can be reasonably measured. Uncertainty with respect to the timing or method of settlement that is conditional on future occurrences does not affect the recognition of the liability but may be factored into its measurement.
The obligation is to be recorded at fair value, which represents the amount that a third party would require to assume the liability. If an active market for these obligations does not exist, the company must use the expected present value technique