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. 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. They call it “asset retirement obligation (ARO)”. Intangible Assets; Asset Retirement Obligations; Stock Base Compensation; Differential Options; The article explains that "ASPE must be adopted on a retrospective basis. ARO is significant for any remediation work needed for restoration, but not for unplanned cleanup or work immediately resulting from an accident. COMMENCEMENT OF DEPRECIATION 514.5. The obligation is recognized at the best estimate of the amount required to settle the obligation at the balance sheet date. They were granted access to the timber resources on the land for 5 years. (ex: If asset value is $100,000 and the obligation reduced by $150,000, would recognize a profit of $50,000 in the P&L. An asset retirement obligation (ARO) is a legal obligation that is associated with the retirement of a tangible, long-term asset. Were acquired, purchased or built with the intention of using the assets for business purposes. Issue #3 – Asset Retirement Obligation Under ASPE and IFRS, the treatment of Asset Retirement Obligation (ARO) are different. Generally-accepted accounting standards (GAAP) require the company to include the present value of the expected (face value of) future decommissioning cost in the total acquisition cost of the asset. Given the assessment of costs and benefits, and a desire for the ASPE standards to be easier IFRIC 1 - If the adjustment results in an addition to the cost of the asset The entity should consider whether this is an indication that the new carrying amount of the asset may not be fully recoverable - in which case impairment test is necessary. DEPRECIATION 514.2. These are the only exemptions allowed and an entity cannot apply them by analogy to other items. 3061 Property, Plant and Equipment, Section 3064 Goodwill and Intangible Assets and Section 3110 Asset Retirement Obligations in Part II of the CPA Canada Handbook – Accounting – ASPE, except for guidance included in Sections 4433 and 4434 related to items such as contributed assets and write-downs of assets. Accounting for Asset Retirement obligation requires to recognize the present value of the expected retirement expenses to be recognized as a liability and fixed asset. 7. h�bbd```b``���3��VɲD21�HV%0V��.��&�Et��� 6GDfp��Y`�H2.����E@$_��?o3�:�P�L�?ÿ�o 0@Z Thank you! Introducing, the CPA PEP ASPE/IFRS Asset Retirement Obligations Review – covering the most tested Financial Reporting competency topic: AROs. Entities at the same time must recognize an offsetting asset retirement cost by increasing the carrying amount of the related long-lived asset. This new Section will be effective for fiscal years beginning on or after April 1, 2021. %%EOF The decision tree in the Appendix provides a summary of the recognition criteria under IFRS. 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�� - major ASPE projects since the introduction of the accounting framework. They call it “asset retirement obligation (ARO)”. Legal obligations 7 Only legal obligations, including obligations created by promissory estoppel, are in scope of this standard. The interest rate used for discounting is the risk-free rate adjusted for the effect of the entity’s credit standing. November 22, 2018 An asset retirement obligation (ARO) is a liability associated with the eventual retirement of a fixed asset. 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. Related party transactions (see paragraph 1500.25). Provisions, Contingent Liabilities and Contingent Assets IAS 37 Provisions, Contingent Liabilities and Contingent Assets IAS 37 Definitions A legal obligation is an obligation that derives from: a contract, legislation, or other operation of law A constructive obligation is an obligation that derives from an entity's actions where: by an established… Thank you! Moderate: 30-35 E13-16: Asset retirement obligation. Under ASPE, an asset retirement obligation should be recognized when a) an asset is impaired and is available for sale. adms 3595 solutions to self practice questions exercise classifications on balance sheet prepared under aspe: current financial liability. Earlier adoption is permitted. 0 Instead of requiring the obligation to be measured at fair value, ASPE requires it to be measured at 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. 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). 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. Trusted And Used By: Contact Us: support@prepformula.com. (b) Prepare any journal entries required for the depot and the asset retirement obligation at December 31, 2011. 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. 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 An asset retirement obligation (ARO) is a legal obligation associated with the retirement of a tangible long-lived asset that an entity is required to settle as a result of an existing or enacted law, statute, ordinance or written or oral contract or An asset retirement obligation is the liability for the removal of property, equipment, or leasehold improvements at the end of the lease term. At the end of the 5 years, Quality is contractually obligated to replant trees on the land. 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. %PDF-1.5 %���� 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) 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. The accounting for these obligations is covered under FASB ASC 410, or Accounting Standards Codification Statement No. This publication is designed to assist professionals in understanding the … For subsequent measurement of contingent consideration, Section 1582 states that it will be re-measured when the ‘contingency is resolved’, while under IFRS In accounting, an asset retirement obligation (ARO) describes a legal obligation associated with the retirement of a tangible, long-lived asset, where a … Asset Retirement Obligations. ���V��,���j���oD#/@� x�f� We'll also show examples from cases and … Asset Retirement Obligations - PSAB; Dec 14, 2017 • 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. Entities recognize a liability for an asset retirement obligation when incurred if its fair value reasonably can be estimated. An example of accounting for an Asset Retirement Obligation. An asset retirement obligation is a legal obligation associated with the permanent removal of a long-lived asset from service. Visit: https://www.farhatlectures.com To access resources such as quizzes, power-point slides, CPA exam questions, and CPA simulations. At the end of the 5 years, Quality is contractually obligated to replant trees on the land. Asset retirement obligations (see paragraph 1500.24). Assume a private enterprise adopts ASPE for the calendar year 2011. ��`�10�371�fyâ���bü�%��;�..U�w�M����f8�碔��S����-)[h�i2��� iF6. 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 … 1185 0 obj <> endobj enterprises (“ASPE”) Section 1521, ... Asset retirement obligations Other financial liabilities Equity shall be presented in accordance with the requirements of Section 3251, Equity. endstream endobj startxref 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. 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. The liability is commonly a legal requirement to return a site to its previous condition. They were granted access to the timber resources on the land for 5 years. The Property, plant, equipment and other assets guide discusses the accounting for acquisition transactions determined to be asset acquisitions under US GAAP. 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. Simple: 10-15 E13-20: Warranties – assurance-type. 7 Deloitte earning Academy ourse catalogue or accounting proessionals 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. principle which includes asset retirement obligations, whereas IFRS 3 does not explicitly allow for an exception for asset retirement obligations. 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 asset retirement obligation (ARO) is a legal obligation that is associated with the retirement of a tangible, long-term asset. $55 10 April 2018, 8:00 PM. We have updated this Financial reporting developments (FRD) publication to reflect the issuance of Accounting Standards Update (ASU) 2019 … 1220 0 obj <>stream FASB Statement no. Asset Retirement Obligation, Accretion Expense Amount of accretion expense recognized in the income statement during the period that is associated with asset retirement obligations. 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