Asset Retirement Obligation


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Asset Retirement Obligation

In accounting, a requirement that a long-term liability that must be retired in the future be recorded at its estimated, fair market value at the time of retirement instead of its value at the time the liability was acquired. This is codified in FASB No. 143.
References in periodicals archive ?
In Japan, except for in a few cases such as reserve for decommissioning costs of nuclear power units of an electric power company (e.g., Tokyo Electric Power Company, 1989, p.35), the accounting treatment that recognizes an asset retirement obligation as a liability and includes the asset retirement cost corresponding to it in the cost of a tangible fixed asset, as required by the global accounting standards, has not been adopted (ASBJ, 2008a, par.22).
The result was SFAS 143, Accounting for Asset Retirement Obligations, issued in June 2001.
But FASB's exposure draft on conditional asset retirement obligations calls for the company to estimate and record a fair value liability.
FASB decided that, at transition, an entity should measure the fair value of a liability for an asset retirement obligation and the corresponding capitalized cost at the date the liability was initially incurred using current information, assumptions and interest rates.
Specifically, the measurement of a liability for an asset retirement obligation should equal what a willing third party would require currently to assume the company's liability.
Under the terms of the proposed transaction, EVG will transfer 100% of its interest in the Rattlesnake Property (including the reclamation bond and the asset retirement obligation associated with the Rattlesnake Property) to a wholly owned subsidiary of RMC.
The company expects the purchase price to be financed with a combination of cash, of about USD74m, plus the assumption of about USD118.0m in certain liabilities and post retirement medical, pension, black lung and asset retirement obligation liabilities.
Accretion of discount on asset retirement obligations is expected to be $3 million to $6 million.
The series of Dispositions eliminates approximately $4.1 million of asset retirement obligations associated with the assets and significantly strengthens the Company's balance sheet.
With the transaction, Cliffs' previously disclosed costs of closing the Australian operations were reduced by approximately $85 million, which included asset retirement obligations assumed by MRL.
Additionally, Cliffs' disclosed the costs of closing the Australian operations were reduced by approximately USD85m,which included the asset retirement obligations assumed by MRL.
Fitch's enterprise value multiple assumption is 4.5x given how much of the industry is distressed and the need for asset valuations to incorporate asset retirement obligations. Fitch notes that its going-concern EBITDA together with its multiple assumption result in an enterprise value that is close to a liquidation value.