Oil & Gas
ARO Accretion Expense (Unwinding of Discount)
Recording the annual unwinding of the discount on the ARO liability.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Accretion Expense (ARO Unwinding) | Expense (+) | 400,000.00 | - |
| Asset Retirement Obligation (Liability) | Liability (+) | - | 400,000.00 |
💡 Accountant's Note
The ARO is initially recorded at present value. Each year, as decommissioning approaches, the discount unwinds — increasing the liability. This 'accretion' is a financing cost, similar to interest expense.
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