Statement 83: What Governmental Hospitals Need to Know About Reporting of Asset Retirement Obligations

asset retirement obligationsRecent Governmental Accounting Standards Board (GASB) guidance, Statement No. 83, Certain Asset Retirement Obligations (Statement 83), will require governmental entities to recognize a liability related to certain asset retirement obligations. Such liability should be legally enforceable and recognized at the time the liability is both incurred and reasonably estimable.

Previous guidance in GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations, required that governments report pollution-related asset retirement obligations at the time of the retirement but did not address reporting during periods prior to the retirement.  Prior to the issuance of Statement 83, there was no authoritative guidance regarding governmental accounting for asset retirement obligations associated with tangible capital assets.

Statement 83 indicates that the determination of when the liability is incurred should be based on the occurrence of events that requires a government to perform asset retirement activities.  For instance, laws and regulations may require governments to take specific actions to retire certain capital assets at the end of their useful lives.  Therefore, organizations would be required to evaluate whether current laws and regulations require specific actions to retire capital assets at the end of their estimated useful lives.

This new guidance requires that the asset retirement obligation be based on the best estimate of the current value of the obligation.  The best estimate should include probability weighting of all potential outcomes when such information is available and can be obtained at a reasonable cost.  If probability weighting is not feasible, the most likely amount of the liability should be used.  A deferred outflow would be reported with a corresponding liability in the statement of net position.

The asset retirement obligation should be annually adjusted for the effects of inflation and any changes in laws, regulations, or similar factors subsequent to the initial recording of that obligation. The deferred outflow of resources should be reduced and recognized as an outflow of resources (and expense) in a systematic and rational manner over the estimated useful life of the tangible capital asset.

Statement 83 is effective for reporting periods beginning after June 15, 2018, with earlier application encouraged.  If practical, all previously presented periods should be restated to conform with Statement 83.  If not practical, then an adjustment to the beginning net position of the organization would be required in the year adopted.

There are also additional disclosure requirements with respect to the asset retirement obligations which governmental entities will need to consider in preparing their financial statements.

If you have any questions about Statement 83 and asset retirement obligations, or you would like to request a speaker on this topic for your organization or event, contact one of our executives below, at (800) 270-9629.


Doug Arnold

Doug Arnold

Principal

Matt Neilson

Matt Neilson

Director of Financial Reporting

Related Posts
PYA is pleased to announce the promotions of Michael Ramey, Matt Stuart, and Jeff Pate to the level of Equity Principal. PYA has announced the promotion of Senior Manager Michael...
Read More

PYA Announces Three New Equity Principals

In today’s business environment, cloud computing arrangements play a key role in the day-to-day operations of companies large and small. The Financial Accounting Standards Board’s (FASB) Accounting Standards Update (ASU)...
Read More

Clearing Up Cloud Computing Accounting

An on-demand webinar, presented by Mike Shamblin, CPA, and brought to you by PYA, helps lay the foundation for the new revenue recognition standard.  The webinar guides healthcare providers of...
Read More

PYA On-Demand Webinar Outlines the New Revenue Recognition Standard in Preparation for Implementation

Qualified conservation easements are becoming an increasingly popular way to save on your tax bill, but what exactly is a conservation easement, and what do you need to know to...
Read More

Conservation Easements: Save the Land, Save Your Money

In the wake of this year’s devastating hurricane season, the President signed into law the “Disaster Tax Relief and Airport and Airway Extension Act of 2017” (the Act). This law...
Read More

Individual Tax Relief for Disaster Areas

Blockchain technology, one of the biggest technology developments in years, has the potential to transform the accounting and audit (A&A) industry. The potential benefits are numerous, but so are the...
Read More

Blockchain Technology—An Audit and Accounting Awakening

Guidance on accounting for share-based payment awards is clear...unless it isn't. The Financial Accounting Standards Board (FASB) offered advisement on this very topic in its Accounting Standards Codification (ASC), Compensation—Stock...
Read More

Share-Based Payment Awards: An Update on Modification Accounting

The growing popularity of companies like Airbnb and Vacation Rentals By Owner (VRBO), has many Americans considering renting out their homes, or even specific rooms in their homes,  in hopes...
Read More

Tax Rules to Know When Renting Your Home

Securing fidelity bond coverage as part of your retirement plan is a step in the right direction toward safeguarding your business from mishandled funds, mismanagement, and abuse. Further, it is...
Read More

The Importance of Fidelity Bond Coverage in Your Retirement Plan

Share This Insight

If you received value from this article, please share it with your network (e.g., Facebook, Twitter, LinkedIn). Icons below for your convenience.

Stay Current

* indicates required
Monthly eNewsletters
See more newsletter and alert options.

PYA Population Health Ascend

PYA Healthcare Blog

PYA Thought Leadership Services

The Healthcare Loop