Reviewing FIN 47

Let’s review what is required for environmental disclosure under FIN 47, recognizing that FAS 157 has “expanded disclosure” requirements for asset retirement obligations beginning in 2009. This step is part of determining what additional work is needed to implement FAS 157.

It’s both FIN 47 and FAS 143, which preceded the release of FIN 47, that already apply for fair value disclosure of material, estimable asset retirement obligations. Here’s what FAS 143 requires:

• Description of asset retirement obligations and the assets to which they apply.
• Fair value amount for assets subject to the asset retirement obligations.
• Reconciliation, whenever there is significant change, of beginning and ending amounts for asset retirement obligations (in aggregate) for the current year, showing separately changes that result from (1) liabilities incurred, (2) liabilities settled, (3) accretion expense, and (4) revisions in estimated cash.

Here’s what is additionally required under FIN 47 in the year a company adopts FIN 47, which for some companies would have been 2005.

• Accounting charge (or beneficial amount) for adopting FIN 47, which is the difference in net income before and after applying FIN 47.
• Fair value amount for asset retirement obligations, reported as both (1) the value at the beginning of the earliest year of asset retirement obligations and (2) the value at the end of the adoption year, adjusted for accretion.

In a subsequent posting, these disclosure requirements for FIN 47 and FAS 143 will be compared with those of FAS 157 so we can identify the additional work needed to meet the new requirements that apply to environmental disclosure.