Oil & Gas
Asset Retirement Obligation (ARO) — Initial Recognition
Recording the present value of the estimated future cost to decommission an oil platform or well.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Oil & Gas Properties (ARO Added to Asset) | Asset (+) | 8,000,000.00 | - |
| Asset Retirement Obligation (Liability) | Liability (+) | - | 8,000,000.00 |
💡 Accountant's Note
IAS 37 / IFRS requires recognition of the decommissioning obligation at the start of production. The liability is the present value of estimated future decommissioning costs. An equal amount is added to the asset and depleted over the reserve life.
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