Project Pages

Asset Retirement Obligations

Project Description: The objective of this project would be to improve financial reporting by developing requirements on recognition and measurement for asset retirement obligations (ARO), other than landfills. The achievement of this objective would reduce inconsistency in current reporting and, therefore, enhance comparability between governments, and it would improve the usefulness of information for decisions and analysis of various users of external financial reports of governments by developing disclosure requirements for these obligations.

Currently being deliberated
Added to Research Agenda: December 2013
Added to Current Agenda: August 2014


: The most common asset retirement obligations (AROs) encountered by governments may be those for landfill closure and post-closure care. The guidance for recognizing, measuring, and reporting those obligations is provided in Statement No. 18, Accounting for Municipal Solid Waste Landfill Closure and Postclosure Care Costs. However, Statement 18 does not apply to the retirement of other capital assets, such as nuclear power plants, coal-fired power plants, or sewage treatment facilities. Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations addresses governments’ obligations to clean up pollution, but does not apply to costs that are an unavoidable part of the cost of retiring a capital asset.

The Financial Accounting Standards Board (FASB) issued FASB Statement No. 143, Accounting for Asset Retirement Obligations in 2001 (now Accounting Standards Codification (ASC) 410, Asset Retirement and Environmental Obligations). In the absence of government-specific guidance that directly addresses asset retirement obligations other than landfills, governments are allowed to apply “other accounting literature” that does not conflict with or contradict GASB standards, according to GASB Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments (GAAP hierarchy).This includes FASB Statement 143. The GASB staff occasionally receives technical inquiries related to AROs, principally asking whether a governmental entity can or should apply FASB Statement 143 or Statement 18 to its asset retirement obligations.

The topic of AROs was raised by stakeholders during the Board’s consideration of matters related to Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. Although AROs were outside the scope of Statement 62, respondents to the Exposure Draft asked for further guidance.

The Government Accounting Standards Advisory Council (GASAC) has considered this project during its annual discussion of project priorities. For 3 of the last 4 years, this topic has ranked in the top 10 non-reexamination projects, ranging as high as sixth among all potential topics and pre-agenda research activities in March 2014. At the October 2013 GASAC meeting, GASAC members commented favorably on the potential addition of pre-agenda research activities relating to business-type activities, including AROs.

Accounting and Financial Reporting Issues: One major topic expected to be addressed will be what constitutes an ARO and what the term retirement should encompass in the guidance. The project will determine a general approach to recognition and measurement of an ARO, considering existing practice among governments and feedback received from preparers and auditors regarding their concerns about complexity, comparability, and the balance of costs and benefits. The project also will consider the following issues:
  • Should costs, if any, associated with AROs should be capitalized? If so, how should these costs be recognized and measured?
  • What information about AROs should be disclosed in the notes to the financial statements?
Project History:
  • Pre-agenda research approved: December 2013
Current Developments: At the July teleconference, Board reviewed an educational memorandum summarizing the results of pre-agenda research on this topic.

Board Meetings Topics to be considered
September­-October 2014: Identification and appointment of task force.
November 2014: Review project history and relevant literature and discussion of definition of asset retirement obligations and scope of the project.
December 2014: Discussion of the general approach in developing new guidance.
January 2015: Discussion of recognition of asset retirement obligations.
March 2015: Discussion of initial measurement of asset retirement obligations.
March 2015 (T/C): Continue discussion of initial measurement of asset retirement obligations.
June 2015 (T/C): Discussion of subsequent measurement of asset retirement obligations.
July 2015: Continue discussion of subsequent measurement of asset retirement obligations.
August 2015 (T/C): Discussion of other topics related to asset retirement obligations, including regulatory accounting and lease-related issues.
September 2015: Discussion of note disclosures.
October 2015: Discussion of transition, effective date, cost-benefit consideration, and draft standards section.
November 2015: Review preballot draft of Exposure Draft.
December 2015 (T/C): Review ballot draft and issue Exposure Draft.
January­-March 2016: Comment period.
April-­August 2016: Redeliberate issues based on respondent feedback.
September 2016: Review preballot draft of final Statement.
October 2016: Review ballot draft and issue final Statement.