![]() ![]() In accordance with ASC 410-20-55-15, the expected present value technique requires that the estimated cash flows be discounted using a credit-adjusted risk-free rate. If the uncertainty of the timing means that a reasonable estimate of fair value cannot be made (as discussed in PPE 3.4.2), the reporting entity may be precluded from recognizing the obligation. In this example, existing laws and regulations create a duty to remove and dispose of the asbestos in a special manner only the timing of the performance of the asset retirement activity is conditional. Additionally, even if there are no current plans to undergo major renovations or demolish the building, the asbestos will eventually need to be removed and disposed of in a special manner, because no building will last forever. In this scenario, the obligation cannot be avoided through sale of the building, as the prospective buyer will either require the seller to remove the asbestos prior to sale or will factor the cost of asbestos management and abatement into the building’s purchase price. The reporting entity is not currently required to remove the asbestos from the factory. The bargaining of the exchange price reflects the buyer’s and seller’s individual estimates of the timing and (or) amount of the cost to extinguish the obligation.įor example, assume a reporting entity owns a factory that contains asbestos and there are regulations in place that require the reporting entity to appropriately handle and dispose of the asbestos in a special manner if the factory undergoes major renovations or is demolished. The assumption of the obligation by the buyer affects the exchange price. ![]() The sale of the poles transfers the obligation to another entity. Additionally, the ability of the entity to sell the poles prior to disposal does not relieve the entity of its present duty or responsibility to settle the obligation. The poles will eventually need to be disposed of using special procedures, because the poles will not last forever. Although the entity may decide not to remove the poles from the ground or may decide to reuse the poles and thereby defer settlement of the obligation, the ability to defer settlement does not relieve the entity of the obligation. Transfers and servicing of financial assetsĪlthough the timing of the performance of the asset retirement activity is conditional on removing the poles from the ground and disposing of them, existing legislation creates a duty or responsibility for the entity to dispose of the poles in accordance with special procedures, and the obligating event occurs when the entity purchases the treated poles. Revenue from contracts with customers (ASC 606) ![]() Loans and investments (post ASU 2016-13 and ASC 326) Investments in debt and equity securities (pre ASU 2016-13) Insurance contracts for insurance entities (pre ASU 2018-12) Insurance contracts for insurance entities (post ASU 2018-12) IFRS and US GAAP: Similarities and differences Business combinations and noncontrolling interestsĮquity method investments and joint ventures ![]()
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