To record an asset retirement obligation (ARO), the cost associated with the ARO is
A) expensed.
B) included in the carrying amount of the related long-lived asset.
C) included in a separate account.
D) capitalized over the asset's useful life.

Question

Quizplus · Accepted Answer

The cost associated with the ARO is included in the carrying amount of the related long-lived asset. This is known as the "asset retirement cost" and represents the estimated costs to retire the asset at the end of its useful life, which are allocated to periods over the asset's useful life. By adding this cost to the carrying amount of the asset, it ensures that the cost is recognized over the same period as the related asset's depreciation or amortization.

To Record an Asset Retirement Obligation (ARO), the Cost Associated