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A KEY CONSIDERATIONS INVOLVED IN THE ACCOUNTING QUESTIONS

1. Is LOI required to recognize asset retirement obligation (ARO) for two warehouses knowing that there is 10% probability that the buyer will require to remove asbestos prior to the sale?

2. Is LOI required to recognize asset retirement obligation (ARO) for ten warehouses that LOI plans to sell within five years?

3. Is LOI required to recognized asset retirement obligation (ARO) for thirteen warehouses that has only minor renovations and repairs and has no information to measure its ARO due to an indeterminate settlement date?

SUMMARY CONCLUSION ON ACCOUNTING QUESTIONS

1. LOI have to recognize asset retirement obligations for two warehouses where the buyer may require LOI to remove the asbestos prior to the sale because the buyer’s right creates a conditional performance obligation.

2. LOI is required to recognize asset retirement obligations for the ten warehouses, which plan to sell them within five years, because it creates a conditional performance obligation, and the expected present value techniques can be applied to reasonably estimate the ARO.

3. LOI is required to recognize asset retirement obligations for the 13 warehouses that LOI plans to operate indefinitely because they will be disposed eventually.

AUTHORITATIVE AND INTREPRETIVE GUIDANCE CONSIDERED

Refer to ASC 410-20-15-2(a) (Scope and scope exceptions in ARO’s)

Refer to ASC 410-20-15-2(c) (Scope and scope exceptions in ARO’s)

Refer to ASC 410-20-25-4 (Recognition of ARO’s)

Refer to ASC 410-20-25-15 (Recognition of ARO’s)

Refer to ASC 410-20-25-8(b) (Recognition of ARO’s)

Refer to ASC 410-20-25-13 (Recognition of ARO’s)

Refer to ASC 410-20-55-51 (Implementation guidance and illustrations)

Refer to ASC 410-20-50-1 (Disclosure)

DETAILED DISCUSSION, ANALYSIS, EVALUATION OF ALTERNATIVES & REASONS FOR CONCLUSION

QUESTION 1

Is LOI required to recognize asset retirement obligation (ARO) for two warehouses...