7252569-MIdterm-1 (dragged) 7

7252569-MIdterm-1 (dragged) 7 - Kieso, Weygandt, Warfield,...

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Kieso, Weygandt, Warfield, Young, Wiecek Intermediate Accounting, Eighth Canadian Edition 13-8 Asset Retirement Obligations 29. In industries such as mining or oil drilling, the construction and operation of long-lived assets often involves obligations at the time of retirement of those assets. A company must recognize an asset retirement obligation (ARO), an existing legal obligation associated with the retirement of a tangible long-lived asset that results from its acquisition, construction, development, or normal operation in the period in which it is incurred, if its fair value can be reasonably estimated. If a fair value cannot be reasonably estimated, the details must be reported in the notes. 30. Obligating Event . Existing legal obligation that requires the recognition of a liability and asset cost such as the cost of restoring or reclaiming oil and gas properties. 31. Measurement . An ARO is initially measured at its fair value, which is defined as the amount that the company would be required to pay. 32.
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