The entire disclosure for an asset retirement obligation and the associated long-lived asset. 0 ARO is a legal obligation associated with the retirement of a tangible capital asset. Section 3462 Employee Future Benefits was issued, along with a revised definition of discontinued operations in Section 3475 Disposal of Long-Lived Assets and Discontinued Operations. ���V��,���j���oD#/@� x�f� ii. REALpac Members remain firmly committed to maintaining the currency and relevance of the REALpac ASPE Handbook to the evolving requirements of our industry, and in ensuring its consistency with GAAP established by the AcSB. Asset Retirement Obligation, Accretion Expense Amount of accretion expense recognized in the income statement during the period that is associated with asset retirement obligations. enterprises (“ASPE”) Section 1521, ... Asset retirement obligations Other financial liabilities Equity shall be presented in accordance with the requirements of Section 3251, Equity. The entire disclosure for an asset retirement obligation and the associated long-lived asset. An asset retirement obligation is the liability for the removal of property, equipment, or leasehold improvements at the end of the lease term. Assume a private enterprise adopts ASPE for the calendar year 2011. Examples of what’s in: • Removal of Asbestos • Retirement of x-ray machines • Boilers • Leased site restoration • Landfill closure / post-closure IN DEPTH: Asset Retirement Obligations. COMMENCEMENT OF DEPRECIATION 514.5. IFRIC 1 - If the adjustment results in an addition to the cost of the asset The entity should consider whether this is an indication that the new carrying amount of the asset may not be fully recoverable - in which case impairment test is necessary. Preparing Personal Tax Returns (T1) Using CCH Tax Prep, Preparing Corporate Tax Returns (T2) Using CCH Tax Prep, Preparing Trust Returns (T3) Using CCH Tax Prep (Coming Soon), Preparing Partnership Returns (T5013) Using CCH Tax Prep (Coming Soon), Tax Planning: Purchase and Sale of an Owner-Managed Business, Protecting Your Clients and Your Professional Practice from Unexpected CRA Penalties, Death of a Taxpayer and Post Mortem Tax Planning, Taxation of Snowbirds: U.S. Tax for Canadian Tax Professionals, International Tax - Canadian Outbound Taxation, Foreign Affiliates, International Tax - Canadian Inbound Taxation for Non-Resident Corporations, International Tax - Completing Foreign Reporting Forms, See all our online tax courses and webinars, existing or enacted law, statute, ordinance or, by the doctrine of promissory estoppel (reliance on a promise is reasonable and foreseeable; and damage would result to the party promised if promise not enforced), The ARO must also meet the definition of a liability, they embody a duty to others that entails yielding of economic benefits, event obligating the entity has already occurred, Therefore, if the obligation is to clean up a site, the ARO is recorded as the contamination occurs, The amount recognized as an ARO shall be the, The amount entity would pay to settle the obligation at the balance sheet date, ARO is reviewed at each balance sheet and adjusted to reflect the current best estimate, When the liability for an ARO is recognized, increase the carrying amount of the related long-lived asset by the same amount (cr. 1220 0 obj <>stream adms 3595 solutions to self practice questions exercise classifications on balance sheet prepared under aspe: current financial liability. ASPE, as determined by the AcSB, to provide readers with a one stop source of ASPE accounting for real estate. And, if you have any questions, please comment below. The majority of the Exposure Draft respondents supported this approach. (ex: If asset value is $100,000 and the obligation reduced by $150,000, would recognize a profit of $50,000 in the P&L. This publication is designed to assist professionals in understanding the … Moderate: 30-35 E13-16: Asset retirement obligation. 1-888-987-0858. The Asset Retirement Obligations ASPE/IFRS Standards Review webinar will help you build your confidence and improve your performance on the 2018 CPA Module Exams and the 2018 CFE, or your money back. ARO is significant for any remediation work needed for restoration, but not for unplanned cleanup or work immediately resulting from an accident. Asset Retirement Obligations - PSAB; Dec 14, 2017 Asset retirement obligations (see paragraph 1500.24). Asset Retirement Obligation is a legal and accounting requirement, in which a company needs to make provisions for the retirement of a tangible long-lived asset in order to bring the asset back to its original condition after the business is done using the asset. AND. Asset Retirement Obligations Existing standards require initial measurement of asset retirement obligations at fair value and provide detailed guidance on how this fair value should be estimated. IP Week 5 Quality Cabinets Inc. (ASPE) Asset Retirement Obligation - ASPE 3110 Issue Quality obtained an operating lease of land from the government for 5 years. Asset Retirement Obligations. METHOD OF DEPRECIATION 514.4. enterprises (“ASPE”) Section 1521, ... Asset retirement obligations Other financial liabilities Equity shall be presented in accordance with the requirements of Section 3251, Equity. This new Section will be effective for fiscal years beginning on or after April 1, 2021. Generally-accepted accounting standards (GAAP) require the company to include the present value of the expected (face value of) future decommissioning cost in the total acquisition cost of the asset. 7. major ASPE projects since the introduction of the accounting framework. Were acquired, purchased or built with the intention of using the assets for business purposes. Summary of ASPE 3110 – Asset Retirement Obligations Only a legal obligation associated with the retirement of a tangible longlived asset, including an obligation created by - promissory estoppel, establishes a clear duty or responsibility to another party that justifies recognition of a liability. An asset retirement obligation (ARO) initially should be measured at fair value and should be recognized at the time the obligation is incurred (provided that a reasonable estimate of fair value can be made). The estimated residual value of the depot is zero. • apply the disclosure requirements for asset retirement obligations under ASPE Asset Retirement Obligations under ASPE Type e-learning Prerequisite knowledge Working knowledge of Part V Canadian GAAP Length 30 minutes Course number E-ASPE106e. At the end of the 5 years, Quality is contractually obligated to replant trees on the land. Related party transactions (see paragraph 1500.25). 7 Deloitte earning Academy ourse catalogue or accounting proessionals The Property, plant, equipment and other assets guide discusses the accounting for acquisition transactions determined to be asset acquisitions under US GAAP. 3110 - Asset retirement obligation.03 - Definition.05 - Recognition - asset retirement obligation.09 - Measurement.10 - Best estimate.14 - PV technique is best.16 - Recognition - asset retirement cost.19 - Subsequent measurement They were granted access to the timber resources on the land for 5 years. For example, certain obligations, such as nuclear decommissioning costs, generally are inc urred as the asset is operated. from discounting) is recognized as, The changes to the liability recognized due to changes in the cash flows are adjusted to the liability and the long-term asset the ARO applies to, ARO Is covered under IAS 37 (Provisions) and IAS 16 (PPE). Issuu is a digital publishing platform that makes it simple to publish magazines, catalogs, newspapers, books, and more online. 1208 0 obj <>/Filter/FlateDecode/ID[<15DF5BA0C6DE3641A637E308656C83B1><28181B771F1E2A4DBF1624B9D263F318>]/Index[1185 36]/Info 1184 0 R/Length 110/Prev 343083/Root 1186 0 R/Size 1221/Type/XRef/W[1 3 1]>>stream We have updated this Financial reporting developments (FRD) publication to reflect the issuance of Accounting Standards Update (ASU) 2019 … The obligation is recognized at the best estimate of the amount required to settle the obligation at the balance sheet date. This Sec­tion es­tab­lishes stan­dards for the recog­ni­tion, mea­sure­ment and dis­clo­sure of li­a­bil­i­ties for as­set re­tire­ment oblig­a­tions and the as­so­ci­ated as­set re­tire­ment costs. Instead of requiring the obligation to be measured at fair value, ASPE requires it to be measured at current asset. Asset retirement obligations essentially must be accounted for as follows. This includes rental property and property that is being used for administrative purposes. And, if you have any questions, please comment below. Legal obligations 7 Only legal obligations, including obligations created by promissory estoppel, are in scope of this standard. Fact Pattern 1 • On January 1, 2020, Entity A enters into a 10-year lease agreement for the lease of land and installs equipment on the land. The interest rate used for discounting is the risk-free rate adjusted for the effect of the entity’s credit standing. Under ASPE, an asset retirement obligation should be recognized when a) an asset is impaired and is available for sale. %%EOF ASPE. - Amortization - We'll review various amortization methods for depreciating capital assets under ASPE - Asset Retirement Obligations - Learn how to record asset retirement obligation assets and liabilities and amortize them over the life of the related asset. (b) Prepare any journal entries required for the depot and the asset retirement obligation at December 31, 2011. Similar to asset retirement obligation covered under ASPE 3110 Decommissioning/restoration is recognized as a Liability (per IAS 37 – provisions); and As part of Property, Plant and Equipment (IAS 16) asset retirement obligation relating to an asset of others, it is a liability but not an asset retirement obligation for the purposes of this standard. Introduction to Asset Retirement Obligation Asset Retirement Obligation is a legal and accounting requirement, in which a company needs to make provisions for the retirement of a tangible long-lived asset, to bring the asset back to its original condition after the business is done using the asset. AND. Visit: https://www.farhatlectures.com To access resources such as quizzes, power-point slides, CPA exam questions, and CPA simulations. Thank you! An asset retirement obligation (ARO) is a legal obligation that is associated with the retirement of a tangible, long-term asset. Visit: https://www.farhatlectures.com To access resources such as quizzes, power-point slides, CPA exam questions, and CPA simulations. Asset retirement obligation/decommissioning cost broadly refers to the amount that a company expects to incur in disposing of the asset and reversing modifications made to the installation site. The lessee constructs a concrete base to support and attach equipment to the land (i.e., the equipment is effectively immoveable). The liability is commonly a legal requirement to return a site to its previous condition. It is generally applicable when a company is responsible for removing equipment or cleaning up hazardous materials at some agreed-upon future date. Courses. The guide also discusses the capitalization of costs, such as construction and development costs and software costs, as well as the subsequent accounting for PP&E, including impairments, depreciation and amortization, and asset … Under ASPE, an asset retirement obligation must be legally required to be recognized. Simple: 10-15 E13-20: Warranties – assurance-type. One of the many nuances of lease accounting, an asset retirement obligation (ARO) is a liability related to the retirement of a tangible long-lived asset when the timing or method of settlement might be dependent upon a future event. Entities at the same time must recognize an offsetting asset retirement cost by increasing the carrying amount of the related long-lived asset. 1185 0 obj <> endobj asset retirement obligation relating to an asset of others, it is a liability but not an asset retirement obligation for the purposes of this standard. This comes with a $500,000 estimated cost to replant. Crude Oil uses straight-line depreciation. They call it “asset retirement obligation (ARO)”. Practice exam 2015, Questions and answers Sample/practice exam 2015, questions and answers International - Business - Notes - Lecture notes, lecture 1 - 15 - All chapters covered from the textbook Lecture notes, lectures 1,2,4,5,6 Assignment 01-BIO 235 - Assighnment 1-BIO 235 - Human Anatomy and Physiology Lecture notes Chapter 1 - Human Anatomy and Physiology They call it “asset retirement obligation (ARO)”. Full Webinar + Note Package Provided. If you find this article useful, please share it with your friends. For subsequent measurement of contingent consideration, Section 1582 states that it will be re-measured when the ‘contingency is resolved’, while under IFRS 4.7 (23) Let's discuss Asset Retirement Obligations from the standpoint of ASPE and IFRS. Based on an effective interest rate of 6%, the present value of the asset retirement obligation (i.e., its fair value) on the date of acquisition is $41,879. 410. However, under both standards the present value of the estimated future cash flows must be determined. Asset retirement obligation. Issue #3 – Asset Retirement Obligation Under ASPE and IFRS, the treatment of Asset Retirement Obligation (ARO) are different. 6. At its meeting on March 22-23, 2018, the PSAB approved the final Handbook Section PS 3280, "Asset Retirement Obligations". We'll also show examples from cases and … At the end of the 5 years, Quality is contractually obligated to replant trees on the land. Asset Retirement Obligations - PSAB; Mar 22, 2018. Given the assessment of costs and benefits, and a desire for the ASPE standards to be easier An asset retirement obligation (ARO) is a legal obligation that is associated with the retirement of a tangible, long-term asset. REALpac ASPE/April 2011 April 2011 On behalf of the members of the Real Property Association of Canada (REALpac), we are pleased to offer the first edition of the REALpac Accounting ... ASSET RETIREMENT OBLIGATIONS 514. 12 Reserve for amount not due Section 22 election on transfer of receivables as from MGMT 2000 at Brock University These exemptions may only be applied once, i.e., on first-time adoption. endstream endobj 1186 0 obj <>/Metadata 53 0 R/Outlines 74 0 R/PageLayout/OneColumn/Pages 1181 0 R/StructTreeRoot 139 0 R/Type/Catalog>> endobj 1187 0 obj <>/ExtGState<>/Font<>/XObject<>>>/Rotate 0/StructParents 0/Type/Page>> endobj 1188 0 obj <>stream h�b```�e���� ��ea���� �r01l�mv�ʿ�� ������0d�s�၀� ��ݻw�ؑ �`��t�VK��iǮ[pl�֝y8K0�[�q���o���p]}3�t@w���s�^=���"�I72HĝN+ �-����P��,@f:��f���L`&;�����h��Z��2�� - h�bbd```b``���3��VɲD21�HV%0V��.��&�Et��� 6GDfp��Y`�H2.����E@$_��?o3�:�P�L�?ÿ�o 0@Z Entities recognize a liability for an asset retirement obligation when incurred if its fair value reasonably can be estimated. FASB Statement no. Moderate: 40-50 E13-17: Unearned revenue: Simple: 10-15 E13-18: Deposits, HST and ARO: Moderate: 10-15 E13-19: Warranties – assurance-type and cash basis. Understanding ASPE Section 1521, Balance Sheet | 3 To learn more about these items or for application guidance, please contact our Private Mid-Market practice at privatecompanyinfo@ca.ey.com. The principles are almost identical, but there are some differences – therefore, please be careful when preparing your financial statements under both standards. An Asset Retirement Obligation (ARO) is a legal obligation associated with the retirement of a tangible long-lived asset in which the timing or method of settlement may be conditional on a future event, the occurrence of which may not be within the control of the entity burdened by the obligation. - Goodwill - Understand how to account for goodwill under ASPE . LIFE AND USEFUL LIFE 514.3. Accounting for Asset Retirement obligation requires to recognize the present value of the expected retirement expenses to be recognized as a liability and fixed asset. The decision tree in the Appendix provides a summary of the recognition criteria under IFRS. One of the many nuances of lease accounting, an asset retirement obligation (ARO) is a liability related to the retirement of a tangible long-lived asset when the timing or method of settlement might be dependent upon a future event. Full Package; Under IFRS, the increase in the carrying value of the decommissioning liability due to the passing of time is recorded as interest expense (borrowing cost), but under ASPE, this is not permitted. 3061 Property, Plant and Equipment, Section 3064 Goodwill and Intangible Assets and Section 3110 Asset Retirement Obligations in Part II of the CPA Canada Handbook – Accounting – ASPE, except for guidance included in Sections 4433 and 4434 related to items such as contributed assets and write-downs of assets. An Asset Retirement Obligation (ARO) is a legal obligation associated with the retirement of a tangible long-lived asset in which the timing or method of settlement may be conditional on a future event, the occurrence of which may not be within the control of the entity burdened by the obligation. Register Now. principle which includes asset retirement obligations, whereas IFRS 3 does not explicitly allow for an exception for asset retirement obligations. The principles are almost identical, but there are some differences – therefore, please be careful when preparing your financial statements under both standards. Legal obligations 7 Only legal obligations, including obligations created by promissory estoppel, are in scope of this standard. Introducing, the CPA PEP ASPE/IFRS Asset Retirement Obligations Review – covering the most tested Financial Reporting competency topic: AROs. Trusted And Used By: Contact Us: support@prepformula.com. Thank you! This article explains the provisions of Statement no. Explanation. ASPE 3061 defines PPE as tangible items that are identifiable, and meet all of the criteria listed below: Are being used for the production of goods and/or services. ii. The present value of dismantling the equipment on June 1, 2017 will be $1,648,890 (see Appendix 3a). An example of accounting for an Asset Retirement Obligation. For subsequent measurement of contingent consideration, Section 1582 states that it will be re-measured when the ‘contingency is resolved’, while under IFRS Liability, dr. long-lived assets), The ARO that is recognized as a long-lived asset is amortized over the useful life of that long-lived asset, The changes to the liability recognized due to the passage of time (i.e. $55 10 April 2018, 8:00 PM. Intangible Assets; Asset Retirement Obligations; Stock Base Compensation; Differential Options; The article explains that "ASPE must be adopted on a retrospective basis. 8. Asset-retirement obligations ASPE retains the same requirements for recording an asset-retirement obligation as those in the current Handbook, except that the measurement has been simplified. An example of accounting for an Asset Retirement Obligation. h��Vmo�0�+���w;�Ф�l0�n��4�ChM��U���sw�Ӵt�o�:���|w~�T*�2����)��9⚥� ��C�2#KL��gRX���2(� �n��l6͛������۱N��]u�*. They were granted access to the timber resources on the land for 5 years. ��`�10�371�fyâ���bü�%��;�..U�w�M����f8�碔��S����-)[h�i2��� iF6. %PDF-1.5 %���� Accretion expense measures and incorporates changes due to the passage of time into the carrying amount of the liability. 143, Accounting for Asset Retirement Obligations— which was seven years in the making—shifts to a balance-sheet approach, requiring businesses to recognize a liability for a retirement obligation when they incur it—even if that is far in advance of the asset’s planned retirement. Under both ASPE and IFRS, an obligation is recognized depending on the likelihood of the outflow of resources to settle the obligation and on the ability to reasonably determine the amount of the outflow. determining whether a transaction represents a business combination or an asset acquisition, accounting for consideration transferred in the transaction and measuring and recognizing the fair value of assets acquired and liabilities assumed. • apply the disclosure requirements for asset retirement obligations under ASPE Asset Retirement Obligations under ASPE Type e-learning Prerequisite knowledge Working knowledge of Part V Canadian GAAP Length 30 minutes Course number E-ASPE106e. November 22, 2018 An asset retirement obligation (ARO) is a liability associated with the eventual retirement of a fixed asset.