GASB ISSUES GUIDANCE ON CERTAIN ASSET RETIREMENT OBLIGATIONS
Norwalk, CT, December 7, 2016—The Governmental
Accounting Standards Board (GASB) today issued guidance for state and
local governments addressing liabilities known as "asset retirement
An asset retirement obligation (ARO) is a legally enforceable liability
associated with the retirement of a tangible capital asset. GASB Statement No. 83, Certain Asset Retirement Obligations,
establishes guidance for determining the timing and pattern of
recognition for liabilities and corresponding deferred outflow of
resources related to AROs.
Existing laws and regulations require state and local governments to
take specific actions to retire certain capital assets, such as the
decommissioning of nuclear reactors and the dismantling and removal of
sewage treatment plants. Other obligations to retire certain capital
assets may arise from contracts or court judgments.
"This Statement establishes clear and consistent accounting and
financial reporting guidance for certain asset retirement obligations,
where little guidance existed before for state and local governments,"
said GASB Chair David A. Vaudt. "This will result in increased certainty
in application for governments, enhanced consistency in financial
reporting, and more meaningful information for users of financial
Under Statement 83, a government that has legal obligations to perform
future asset retirement activities related to its tangible capital
assets is required to recognize a liability and a corresponding deferred
outflow of resources. The guidance also identifies the circumstances
that trigger recognition of these transactions.
The Statement requires the measurement of an ARO to be based on the best
estimate of the current value of outlays expected to be incurred. The
deferred outflow of resources associated with an ARO will be measured at
the amount of the corresponding liability upon initial measurement and
generally recognized as an expense during the reporting periods that the
asset provides service.
Disclosure requirements include a general description of the ARO and
associated tangible capital assets, the source of the obligation to
retire the assets, the methods and assumptions used to measure the
liability, and other relevant information.
The requirements of Statement 83 are effective for reporting periods
beginning after June 15, 2018, with earlier application encouraged.
The full text of Statement 83, Certain Asset Retirement Obligations, is available at www.gasb.org.
About the Governmental Accounting Standards Board
Established in 1984, the GASB is the independent, private-sector
organization based in Norwalk, Connecticut, that establishes accounting
and financial reporting standards for U.S. state and local governments
that follow Generally Accepted Accounting Principles (GAAP). These
standards are recognized as authoritative by state and local
governments, state Boards of Accountancy, and the American Institute of
CPAs (AICPA). The GASB develops and issues accounting standards through a
transparent and inclusive process intended to promote financial
reporting that provides useful information to taxpayers, public
officials, investors, and others who use financial reports. The
Financial Accounting Foundation (FAF) supports and oversees the GASB.
For more information, visit www.gasb.org.