Asset Retirement Obligation

Asset retirement obligation is an accounting rule and it is the rule no 143 that is designed and implemented by Financial Accounting Standard Board in year 2001. This rule implies to all public limited companies to recognize the fair and accurate value of all the retirement obligations for their tangible and long lived assets. The reason behind recording the fair value of the long lived asset is that it will result in making a more accurate balance sheet. The asset retirement obligation is important because with the passage of time more businesses are now focusing on balance sheet figures rather than using income statement. Thus a number of businesses are moving to the balance sheet approach rather than using income statement approach.

An asset is known as a retire asset when it is kept permanently out of use. For example all the old assets that are kept out of use such as through sale and disposal are called as retire asset. The asset retirement obligation of an old asset can be recognized at two points. It can either be recognized when the asset is being placed at the service during the operating life of the asset or it can be done at the point the asset removal obligation is being done for an old asset. Asset retirement obligation is not a simple process rather it is a complex process that requires complex calculations and computations so it must be done under the assistance of a CPA.

Other Related Accounting Articles:

• Asset Retirement Obligation
• Regulatory Asset
• Appraisal Capital Explained
• Write Up
• Designated Beneficiary
• The Cost Method of Investment Accounting
• Acquisition Accounting
• Assets under Management
• Write Down
• Pooled Cost of Funds