principle which includes asset retirement obligations, whereas IFRS 3 does not explicitly allow for an exception for asset retirement obligations. 8. ASPE, as determined by the AcSB, to provide readers with a one stop source of ASPE accounting for real estate. For subsequent measurement of contingent consideration, Section 1582 states that it will be re-measured when the ‘contingency is resolved’, while under IFRS • 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. ii. The lessee constructs a concrete base to support and attach equipment to the land (i.e., the equipment is effectively immoveable). 1220 0 obj <>stream The Property, plant, equipment and other assets guide discusses the accounting for acquisition transactions determined to be asset acquisitions under US GAAP. 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. The obligation is recognized at the best estimate of the amount required to settle the obligation at the balance sheet date. 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. This new Section will be effective for fiscal years beginning on or after April 1, 2021. Issuu is a digital publishing platform that makes it simple to publish magazines, catalogs, newspapers, books, and more online. Legal obligations 7 Only legal obligations, including obligations created by promissory estoppel, are in scope of this standard. Instead of requiring the obligation to be measured at fair value, ASPE requires it to be measured at Asset Retirement Obligations - PSAB; Mar 22, 2018. 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 This publication is designed to assist professionals in understanding the … 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. This Section establishes standards for the recognition, measurement and disclosure of liabilities for asset retirement obligations and the associated asset retirement costs. LIFE AND USEFUL LIFE 514.3. 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 … 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. 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 Tags In. 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… If you find this article useful, please share it with your friends. They were granted access to the timber resources on the land for 5 years. They were granted access to the timber resources on the land for 5 years. Entities recognize a liability for an asset retirement obligation when incurred if its fair value reasonably can be estimated. And, if you have any questions, please comment below. Understanding ASPE Section 1521, Balance Sheet | 3 To learn more about these items or Given the assessment of costs and benefits, and a desire for the ASPE standards to be easier ARO is a legal obligation associated with the retirement of a tangible capital asset. The estimated residual value of the depot is zero. Issue #3 – Asset Retirement Obligation Under ASPE and IFRS, the treatment of Asset Retirement Obligation (ARO) are different. 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. These are the only exemptions allowed and an entity cannot apply them by analogy to other items. Asset retirement obligations essentially must be accounted for as follows. The majority of the Exposure Draft respondents supported this approach. Visit: https://www.farhatlectures.com To access resources such as quizzes, power-point slides, CPA exam questions, and CPA simulations. These exemptions may only be applied once, i.e., on first-time adoption. For example, certain obligations, such as nuclear decommissioning costs, generally are inc urred as the asset is operated. DEPRECIATION 514.2. The entire disclosure for an asset retirement obligation and the associated long-lived asset. Entities at the same time must recognize an offsetting asset retirement cost by increasing the carrying amount of the related long-lived asset. The interest rate used for discounting is the risk-free rate adjusted for the effect of the entity’s credit standing. %PDF-1.5 %���� 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 in order to bring the asset back to its original condition after the business is done using the asset. ii. 7. 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. AND. The accounting for these obligations is covered under FASB ASC 410, or Accounting Standards Codification Statement No. AND. November 22, 2018 An asset retirement obligation (ARO) is a liability associated with the eventual retirement of a fixed asset. This article explains the provisions of Statement no. Introducing, the CPA PEP ASPE/IFRS Asset Retirement Obligations Review – covering the most tested Financial Reporting competency topic: AROs. 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. 7 Deloitte earning Academy ourse catalogue or accounting proessionals %%EOF 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. FASB Statement no. Moderate: 30-35 E13-16: Asset retirement obligation. 410. $55 10 April 2018, 8:00 PM. Asset Retirement Obligations. An asset retirement obligation is a legal obligation associated with the permanent removal of a long-lived asset from service. Thank you! 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. enterprises (“ASPE”) Section 1521, ... Asset retirement obligations Other financial liabilities Equity shall be presented in accordance with the requirements of Section 3251, Equity. An example of accounting for an Asset Retirement Obligation. Courses. Simple: 10-15 E13-20: Warranties – assurance-type. 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. Accounting for Asset Retirement Obligation. We have updated this Financial reporting developments (FRD) publication to reflect the issuance of Accounting Standards Update (ASU) 2019 … endstream endobj startxref Earlier adoption is permitted. ���V��,���j���oD#/@� x�f� If you find this article useful, please share it with your friends. ASPE. Trusted And Used By: Contact Us: support@prepformula.com. 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 Asset retirement obligations are legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of such assets. However, under both standards the present value of the estimated future cash flows must be determined. Thank you! The liability is commonly a legal requirement to return a site to its previous condition. RECOGNITION ASSET RETIREMENT OBLIGATION • 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, statue, ordinance or written or oral contract or by legal construction or a contract under the doctrine of promissory estoppels. Asset Retirement Obligations - PSAB; Dec 14, 2017 major ASPE projects since the introduction of the accounting framework. 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 current asset. 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. Under ASPE, an asset retirement obligation should be recognized when a) an asset is impaired and is available for sale. 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. An asset retirement obligation is the liability for the removal of property, equipment, or leasehold improvements at the end of the lease term. And, if you have any questions, please comment below. The present value of dismantling the equipment on June 1, 2017 will be $1,648,890 (see Appendix 3a). Crude Oil uses straight-line depreciation. This includes rental property and property that is being used for administrative purposes. - 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. 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) COMMENCEMENT OF DEPRECIATION 514.5. Asset retirement obligations (see paragraph 1500.24). The entire disclosure for an asset retirement obligation and the associated long-lived asset. The principles are almost identical, but there are some differences – therefore, please be careful when preparing your financial statements under both standards. An example of accounting for an Asset Retirement Obligation. 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Examples of what’s in: • Removal of Asbestos • Retirement of x-ray machines • Boilers • Leased site restoration • Landfill closure / post-closure 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. 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