SAMPLE MEMO FORMAT 2013 10

ISSUE: Should LOI recognize an asset retirement obligation for each of the categories of warehouses with asbestos?
BRIEF BACKGROUND OF COMPANY
Lack of Information (LOI) owns and operates 50 warehouses throughout the country. As part of LOI’s efforts to identify potential asset retirement obligations, LOI’s internal audit group held interviews with all 50 of the warehouse managers and also performed site visits at each of the 50 locations.

KEY CONSIDERATIONS INVOLVED IN THE ACCOUNTING QUESTIONS

1. Should LOI recognize an asset retirement obligation for the two warehouses in states with special asbestos handling and disposal laws?
2. Should LOI recognize an asset retirement obligation for the ten warehouses that will likely be sold before being required to remove the asbestos?
3. Should LOI recognize an asset retirement obligation for the two warehouses in states without special asbestos handling and disposal laws?
4. Should LOI recognize an asset retirement obligation for the thirteen warehouses for which the settlement date is indeterminate?

SUMMARY CONCLUSION ON ACCOUNTING QUESTIONS

1. LOI should recognize an asset retirement obligation.
2. LOI has ability to estimate fair value.
3. There is a low probability of buyer to require LOI to remove asbestos. This is reflected in the fair value of the liability but does not affect recognition.
4. LOI cannot defer obligation indefinitely, so LOI has basis for estimating fair value.

AUTHORITATIVE AND INTREPRETIVE GUIDANCE CONSIDERED

ASC 410-20-15-2 (Asset Retirement and Environmental Obligations)
ASC 410-20-25-4 (Asset Retirement and Environmental Obligations)
ASC 410-20-15-2a (Asset Retirement and Environmental Obligations)
ASC 410-20-25-8b (Asset Retirement and Environmental Obligations)
ASC 410-20-25-5 (Asset Retirement and Environmental Obligations)
ASC 410-20-25-7 (Asset Retirement and Environmental Obligations)
ASC 410-20-25-13 (Asset Retirement and Environmental Obligations)

DETAILED DISCUSSION,