Accounting for asset retirement obligations

With the long-term business trend toward a more balance-sheet oriented focus in accounting, FASB has fixed its attention on how entities account for obligations associated with the retirement of tangible long-lived assets. In the past, many businesses employed an income-statement approach. FASB Statement no. 143, Accounting for Asset Retirement Obligations, 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. This article explains the provisions of Statement no. 143 as companies and their accountants will need to apply them.