How Are Public Institutions Handling Asset Retirement Obligations?
December 12, 2013
The Governmental Accounting Standards Board (GASB) has begun researching the prevalence of asset retirement obligations (AROs) and current financial accounting and reporting practice by governmental entities, such as public colleges and universities. AROs represent retirement obligations associated with long-lived assets; such obligations can be particularly significant for environmental remediation work that may be necessary to restore a property.
Because GASB literature does not currently provide specific guidance for dealing with AROs, pre-agenda research has begun to determine if the GASB should add AROs to its technical agenda. Exploration on this topic would identify the types of asset retirement obligations currently encountered in the government environment and attempt to quantify the significance of those events.
The main objective of the pre-agenda work is to:
- Research the various types of asset retirement obligations currently encountered in practice.
- Determine whether current accounting and reporting requirements are sufficient or if additional guidance needs to be developed for such obligations.
The guidance for recognizing and measuring certain types of AROs appears in GASB Statement No. 18, "Accounting for Municipal Solid Waste Landfill Closure and Post-closure Care Costs," which was issued 20 years ago (1993). However, Statement 18 does not apply to the retirement of any other public sector capital assets, such as nuclear power plants or sewage treatment facilities. Although GASB Statement No. 49, "Accounting and Financial Reporting for Pollution Remediation Obligations," would apply to a government's obligation to clean up pollution associated with non-landfill public capital assets, it provides guidance only for pollution that is evident.
Because AROs can be complex or associated with actions to prevent pollution from occurring, rather than remediate pollution after the fact, the GASB wonders if governmental entities, such as public institutions, follow standards considered as "other accounting literature.". These would include FASB Statement No. 143, "Accounting for Asset Retirement Obligations" (now ASC 410, Asset Retirement and Environmental Obligations). GASB Statement No. 55, "The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments (GAAP hierarchy)," allows governments to apply FASB literature issued after November 30, 1989, provided GASB literature does not directly address an issue and the FASB literature does not conflict with or contradict GASB standards.
To assist the GASB, NACUBO would like to hear from public institutions that have dealt with AROs. Please contact Sue Menditto, director of accounting policy, or send an email to Julian Su of the GASB by January.
Director, Accounting Policy
- NACUBO Provides Input on Tax Reform
- FASB Considers Delaying Revenue Recognition Standard
- Push for Resolution to 1098-T Fines Continues
- 2015 Higher Education Accounting Forum
April 26-28, 2015
- 2015 CAO and CBO Collaborations
August 3-4, 2015
- 2015 Planning and Budgeting Forum
September 28-29, 2015
- WEBCAST: NACUBO LIVE!: The Future Chief Business Officer
Tuesday, April 28, 2015 11:00AM ET
- WEBCAST: Analytics that Support Planning, Budgeting, and Results
Thursday, April 30, 2015 1:00PM ET
- WEBCAST: Corporate Sponsorships: Getting it Right
Thursday, May 14, 2015 1:00PM ET
- WEBCAST: Lessons Learned in Communicating Financial Information Effectively
Monday, May 18, 2015 1:00PM ET
- ON-DEMAND: Looking Under the Hood: Using Web-based Tools for Evaluating Institutional Financial Aid Policy
- ON-DEMAND: VIRTUAL: 2014 Annual Meeting
- A Guide to College and University Budgeting: Foundations for Institutional Effectiveness, 4th ed. - by Larry Goldstein
- NACUBO's Guide to Unitizing Investment Pools - by Mary S. Wheeler
- Managing and Collecting Student Accounts and Loans - by David R. Glezerman and Dennis DeSantis