Are you ready to identify your asset retirement obligations?
Local governments are beginning to implement GASB Statement No. 83 on asset retirement obligations, or ARO's, which is effective for reporting periods beginning after June 15, 2018. For GAAP reporting entities, this new standard requires reporting liabilities for future costs related to retiring assets. For example, costs related to a well or sewer lagoon closure or reclamation of gravel or sand stock areas. Cash basis governments should report these obligations on Schedule 9 (Schedule of Liabilities) and disclose them. To help local governments begin, the Center for Government Innovation has published a new resource to help you identify asset retirement obligations in Washington. This guidance provides implementation tips as well as a list of assets and related disposition requirements that you should consider when starting your research.
In recent months, our staff, in coordination with the state Office of Financial Management (OFM), have reached out to the Governmental Accounting Standards Board (GASB) on several technical inquiries related to ARO's. One of the primary purposes of our inquiry was to confirm that liabilities associated with asbestos removal that are not already reported as pollution remediation liabilities are not expected to fall within the scope of GASB 83.
Another topic we discussed with GASB was whether there can be an ARO associated with assets that have indefinite useful lives or no foreseeable disposition, such as a megastructure hydroelectric facility like Hoover Dam. We learned that these instances would require only a note disclosure, assuming the local government can adequately support that the asset does in fact have an indefinite useful life or no foreseeable disposition. We will soon be updating guidance in our Budgeting, Accounting and Reporting System (BARS) Manual to specifically address this and other matters related to ARO's for both GAAP and cash basis governments.
We encourage you to check out the information in our new resource to help you further understand, identify and properly report asset retirement obligation liabilities. We also thank the staff at OFM, as well as the University of Washington, for coordinating with our Office on these technical matters.