GASB Issues Statement on Asset Retirement Obligations
State and local governments seeking clear and consistent direction on asset retirement obligations received help this week in the form of Governmental Accounting Standards Board (“GASB”) Statement No. 83, Certain Asset Retirement Obligations. The new standard provides governmental entities accounting and financial reporting guidance for determining liabilities and corresponding deferred outflow of resources associated with asset retirement obligations.
Per the guidance, an entity legally obligated to carry out future asset retirement activities associated with its tangible capital assets must recognize a liability and a corresponding deferred outflow of resources. GASB Statement 83 also lists the situations that cause these transactions to be recognized.
An entity will be required to measure an asset retirement obligation based on the top estimate of the current worth of outlays expected to incur. The deferred outflow of resources related to an asset retirement obligation must be assessed by the corresponding liability at initial measurement and listed as an expense in the reporting periods the service is provided.
Entities will be required to disclose a general description of the asset retirement obligation and related tangible capital assets, where the obligation to retire the assets came from, the means and assumptions used to calculate the liability, and other pertinent information.
GASB Statement No. 83 is effective for reporting periods starting after June 15, 2018. Early application is encouraged. GASB Chairman David Vaudt says the standard will enhance financial reporting and provide financial statement users more important information.