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I would like to know how to record the asset retirement obligation on a new plant....

I would like to know how to record the asset retirement obligation on a new plant. I'm not sure of what all the information is needed to figure this out.

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Answer #1

Asset retirement obligation is the legal obligation associated with retiremennt of tangible long lived assets resulting from acquisition/construction/development/normal operations except for certain lease obligations.

There are certain conditions o record asset retirement obligation, is that it can be recorded only when it meets the definition of Liability

  • Duty/Responsibility
  • Little/No discretion to avoid

Initial Measurment

Asset retirement cost DR

To Asset retirement obligation

(Above measuement is done at fair value = Present value of future obligations)

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