The government should not recognize a liability for an asset retirement obligation until expenses are incurred.

Question

Quizplus · Accepted Answer

An asset retirement obligation (ARO) is recognized when the liability is incurred, typically when the asset is installed or acquired, not when expenses are actually incurred. This approach follows the matching principle, ensuring costs are recognized in the same period as the benefits provided by the asset.

The Government Should Not Recognize a Liability for an Asset