Hard to say

FASB has required fair value measurement and disclosure of asset retirement obligations since 2005. Actually longer, since FAS 143, Accounting for Asset Retirement Obligations, released in June 2001, has been effective for financial statements for fiscal years beginning after June 15, 2002.

It was FASB’s interpretation of FAS 143 for application to conditional asset retirement obligations, in its release of FIN 47 in March 2005, effective for fiscal years ending after December 15, 2005, that seems to have set the most-referenced requirement date for disclosure of asset retirement obligations. Rather like there could be no more good excuses for non-disclosure after FIN 47.

It is hard to say how much disclosure of companies’ asset retirement obligations has taken place. In an often-cited study following up the first fiscal year of FIN 47 applicability, the Controllers’ Leadership Roundtable reported there was “great disparity,” including among similar companies, in how companies responded to FIN 47.

Somewhat obliquely, I would contend, the study cited accounting charges taken by companies for “truing-up” the cost of asset retirement obligations. [See the January 31, 2007 posting.] Those were one-time charges.

I would say they (the reviewers of the disclosure information) missed an opportunity to report asset retirement obligation costs themselves for that first year of FIN 47 applicability, i.e., to provide a benchmark. It is those costs that companies must continue to disclose after 2005.

No hands are tied, so to speak, including those of this writer, with regards to reviewing and reporting the asset retirement obligation costs disclosed for that first year, i.e., for composing a benchmark. The information is public.

Next year, i.e., for 2009, companies also will have the requirements of FAS 157 to instruct their development and disclosure of fair value measurements.