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Understand the accounting requirements in ASC 410
On the Radar: Environmental and ARO accounting
Environmental obligations can arise from the improper operation, retirement, or closing of a facility and the current or former ownership of a facility at or near a contaminated site. An asset retirement obligation (ARO) is a legal obligation associated with the retirement of a tangible long-lived asset. This On the Radar edition gives guidance on the accounting requirements established for both in ASC 410-30 and ASC 410-20, respectively.
Understanding environmental obligations and asset retirement obligations
Environmental obligations can arise from (1) the improper operation, retirement, or closing of a facility and (2) the current or former ownership of a facility at or near a contaminated site. Entities that have incurred a legal obligation to remove or remediate pollution or contaminants from environmental media such as soil, sediment, groundwater, and surface water are generally required to recognize an environmental remediation liability in their financial statements when certain conditions are met.
An asset retirement obligation (ARO) is a legal or contractual obligation associated with the retirement of a tangible long-lived asset that results from the acquisition, construction, development, and normal operation of that long-lived asset.
The FASB has established specific guidance on accounting for environmental obligations and AROs in ASC 410.
Liabilities and obligations
Continue your environmental obligations and asset retirement obligations learning
Deloitte’s Roadmap Environmental obligations and asset retirement obligations comprehensively discusses the recognition, measurement, presentation, and disclosure guidance in ASC 410-20 and ASC 410-30.
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