Trueblood
Lack of Information Case
Lack of Information (LOI) has 25 warehouses which contain asbestos. LOI has chosen not to recognize an asset retirement obligation for any of the warehouses. There are three different sets of facts as to why LOI is not recognizing an obligation. For each set of circumstances we will determine if LOI is properly omitting an asset retirement obligation or if further action is necessary.
23 of the 25 warehouses reside in states with special asbestos handling and removal laws. If the buildings are demolished or significantly renovated, LOI is responsible for the removal of the asbestos. For 10 of the 25 warehouses that reside in states with special asbestos handling and removal laws, LOI plans to sell the buildings without ever meeting the criteria to have to remove the asbestos and thus no obligation exists.
ASC 240-20-55-58 and ASC 240-20-55-60 state that although timing of the performance of the asset retirement activity is conditional on the factory undergoing major renovations or being demolished, existing regulations create a duty or responsibility for the entity to remove and dispose of asbestos in a special manner, and the obligating event occurs when the regulation is put in place (55-58) or when the entity acquires the factory (55-60). LOI’s plans to sell the building in the next five years signifies an active market for the transfer obligation and meets the criteria for recognizing the fair value of the retirement obligation according to ASC 240-20-25-6.
For the other 13 buildings, LOI has no plans in the foreseeable future to make significant renovations or demolish the buildings. Since there is not sufficient information to measure its asset retirement obligation due to an indeterminate settlement date LOI does not recognize the obligation. I agree that LOI cannot recognize the fair value of their obligation. However, ASC 240-20-50-1 gives guidance on necessary disclosure. LOI should disclose the obligation including a
Lack of Information (LOI) has 25 warehouses which contain asbestos. LOI has chosen not to recognize an asset retirement obligation for any of the warehouses. There are three different sets of facts as to why LOI is not recognizing an obligation. For each set of circumstances we will determine if LOI is properly omitting an asset retirement obligation or if further action is necessary.
23 of the 25 warehouses reside in states with special asbestos handling and removal laws. If the buildings are demolished or significantly renovated, LOI is responsible for the removal of the asbestos. For 10 of the 25 warehouses that reside in states with special asbestos handling and removal laws, LOI plans to sell the buildings without ever meeting the criteria to have to remove the asbestos and thus no obligation exists.
ASC 240-20-55-58 and ASC 240-20-55-60 state that although timing of the performance of the asset retirement activity is conditional on the factory undergoing major renovations or being demolished, existing regulations create a duty or responsibility for the entity to remove and dispose of asbestos in a special manner, and the obligating event occurs when the regulation is put in place (55-58) or when the entity acquires the factory (55-60). LOI’s plans to sell the building in the next five years signifies an active market for the transfer obligation and meets the criteria for recognizing the fair value of the retirement obligation according to ASC 240-20-25-6.
For the other 13 buildings, LOI has no plans in the foreseeable future to make significant renovations or demolish the buildings. Since there is not sufficient information to measure its asset retirement obligation due to an indeterminate settlement date LOI does not recognize the obligation. I agree that LOI cannot recognize the fair value of their obligation. However, ASC 240-20-50-1 gives guidance on necessary disclosure. LOI should disclose the obligation including a