The liability is commonly a legal requirement to return a site to its previous condition. 23 of the 25 warehouses reside in states with special asbestos handling and removal, laws. Asset Retirement obligation Nature b) Loan processing fees/ transaction cost: c) Proposed dividend: d) Fair valuation of ESOP: Ind AS, such obligation is recognised and measured at present value. As per para 56(d) of Ind AS, while considering the useful life of an asset, legal or similar limits on the use of the asset, such as the expiry dates of related leases shall be considered. Asset recognition is permitted when it is controlled by the entity and it is probable that there will be an inflow of future economic benefits attributable to the asset and that the cost of the asset is measurable reliably. 2. If in the first example, ARO liability was to be increased to Rs.11000, the accounting entry shall be as follows: 3. the change in the ARO liability is an indication that the asset may have to be revalued in            order to ensure that its carrying amount does not differ materially from its fair value at the          end of the reporting period. If the retired assets could not be used further, it shall be depreciated over the period of lease unless it is more than the useful life of the asset. Ind AS 1 requires disclosure in the statement of profit and loss of each component of other comprehensive income or expense. If a        revaluation is necessary, all assets of that class shall be revalued. There are certain assets which must adhere to decommissioning obligations. In the above example, demolition of building requires outflow of cash towards labour, equipments, transportation expenses etc. their obligation. Thereafter finance cost is to be charged on the new ARO balance for each accounting period till the date of obligation. Retirement obligations can be recognized either when the asset is placed in service or. Journal entry for accounting of ARO is as follows: Building A/c                    Dr    Rs.17777, To ARO Liability A/c   Cr                  Rs.17777, [Being ARO cost capitalised as part of cost of Building and ARO liability created for meeting the obligation later], ARO liability GL shall be disclosed in the Balance Sheet under non- current liabilities. Compendium of Indian Accounting Standards (Year 2020-2021) Volume I (Ind AS 101-116) Volume II (Ind AS 1-41) Compendium of Indian Accounting Standards (Year 2019-2020) All remaining listed companies and other unlisted companies with a net worth of more than INR250 crore (phase II companies) are required to apply Ind AS from 1 April 2017 (with 1 … A financial asset is any asset that is: (a) cash; (b) an equity instrument of another entity; Example – Shares owned of a listed entity An asset retirement obligation is a type of legal obligation that applies to businesses that have long-lived assets that will someday be retired. Period of 10 years have lapsed and the carrying amount of various GLs are as follows: ARO liability initially recognised: Rs.17777, Finance cost charged for 10 years: Rs.24307, ARO liability balance as on date: Rs.42084. Ind AS (New IGAAP) As per Ind AS such expenditure are amortised over the period of the loan As per Ind … 3,09,000 will be shown as deferred tax asset under non-current assets. If in the above example after the lapse of 10 years, only the lease term is extended by 3 years and other things remaining same so that the timing of the fulfilment of the obligation i.e the demolition and restoration of the site stands postponed by 3 years. There can be variation in the discount rate used, or change in the estimate of the cost initially assessed or the lease period may vary. An asset group consists of asset X with an estimated remaining life of five years, asset Y with an estimated life of seven years and asset Z (the primary asset) with a four-year life. Disclaimer: This website is intended for informative purpose only and  users may use it at their discretion only. Taxability of amount received on Voluntary Retirement under Voluntary Retirement Scheme or any similar scheme (10(10C)) GST on used goods. Chapter 4 — Accounting for Asset Retirement Obligations 74 4.1 Overview of ASC 410-20 74 4.2 Scope of ASC 410-20 75 4.2.1 Application of ASC 410-20 to Environmental Remediation Liabilities 77 4.2.2 Application of ASC 410-20 to Leases 78 4.3 Initial Recognition of AROs and Asset Retirement Costs 80 To, Defined Benefit Obligation (Closing Balance – Opening Balance) Cr. Indicators of transfer of control are (but not limited to): Entity has a present right to payment for that asset. Introduction With the applicability of the new Ind AS on certain class of Companies, it was evident that there was now a need for an amendment to the Schedule III of The Companies Act, 2013. 38,018,395 ; Present Value o f Obligation as at the end . Ind AS (New IGAAP) As per Ind AS such expenditure are amortised over the period of the loan As per Ind … As per para 60 of Ind AS 37, where discounting is used, the carrying amount of a provision increases in each period to reflect the passage of time. during its operating life at the point when its removal obligation is incurred. Revision in ARO liability if the related asset has reached its useful life, Once the related asset has reached the end of its useful life, all subsequent changes in the ARO liability shall be recognised in profit or loss as they occur. Lack of Information (LOI) has 25 warehouses which contain asbestos. This inflated amount has to be discounted back to the date of capitalisation of the building in the books of the entity since such ARO cost have to be capitalised as part of the cost of the asset as required by Ind AS 16. The entire disclosure for an asset retirement obligation and the associated long-lived asset. The Current status of … Other Benefits e.g. Reconciliation of Asset (Ind AS19) Asset reconciliation under Ind AS19 For the period ending 31-Mar-15 Fair Value of Plan Assets as at the beginning 178,255,885 Investment Income (calculated @ 9.25%, which is the discount rate) 16,488,669 tangible, long-lived assets in order to make their balance sheets more accurate. Generally-accepted accounting standards (GAAP) require the company to include the present value of the expected (face value of) future decommissioning cost in the total acquisition cost of the asset. 143 (FAS 143), Accounting for Asset Retirement Obligations, requires an entity to recognize the fair value of a liability for legal obligations associated with the retirement of a tangible long-lived asset in the period in which it is incurred if a reasonable estimate of fair value can be made. - DTA on asset retirement obligation, security deposits & tax free bonds: 14.63 Additionally in consolidation there is DTL recognized on undistributed earnings in subsidiaries for Rs. a. Accounting for asset retirement obligation. Here the obligation to dismantle and restore the asset may arise on having acquired the asset or as a result of using the asset over a period of time. As per Ind-AS:2 if an entity make the similar asset for sale in normal course of business, the cost of the asset is usually the same as the cost of constructing an asset for the sale. I agree that LOI cannot recognize the fair value of. impairment functionality satisfies asset retirement obligation requirements. This obligation of A is termed as Asset Retirement Obligation. An asset retirement obligation (ARO) is a liability associated with the eventual retirement of a fixed asset. In scenarios like these, Ind-AS 16 gives reference to Ind-AS 37 on Provisions, Contingent Assets and Contingent Liabilities. The Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. • The transitional provisions under the Schedule II to the 2013 Act prescribes that the carrying amount of the asset as on 1 April 2014: – Should be depreciated over the remaining useful life of the asset –any income credited directly to a After retaining the residual value, may be recognised in the opening balance of retained earnings or may be charged off to the statement of profit and loss, where the remaining … Asset retirement obligation, Decommissioning liability etc.) The inflation rate is assumed as 5.876% and the discount rate used is 9%. The decrease of ARO liability of Rs.4000 shall be accounted as follows: ARO Liability              Dr        4000. This legal obligation is created as a result of installation of machine at site, even though cost will be incurred on date of retirement. 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