5.6 Asbestos
Asbestos is a group of naturally occurring minerals with thin fibrous crystals that can be released
when disturbed. Asbestos fibers have been linked to many medical conditions and as a result have
been regulated in some manner for the past 50 years. While regulations in the United States have
not completely banned the use of asbestos, there are various federal and state regulations related to
the disposal of asbestos-containing material (ACM). The regulation of the disposal of ACM results in a
retirement obligation for ACM.
ACM has insulating and strengthening characteristics and is commonly found in building insulation, pipe
wrap, flooring and roofing, and gaskets. It is most often encountered during building demolition and
remodeling or repair. Because many states regulate only the disposal of ACM, the settlement date for
the obligation to address the ACM may be uncertain and will depend on when the asset containing the
ACM is disposed of (which may be subject to significant management discretion).
The examples in the implementation guidance of ASC 410-20-55-57 through 55-62
address the availability of sufficient information and the ability to reasonably
estimate the fair value of an ARO related to the removal and disposal of asbestos.
When ACM is known to exist, a market participant would presumably consider the cost
of addressing the liability in any purchase regardless of settlement date. As with
other AROs, uncertainty of timing should not otherwise prevent the recognition of an
ARO, and the uncertainty should be incorporated in the fair value measurement.