If a company incurs legal obligations associated with the retirement of a tangible long-lived asset as a result of acquiring the asset:

Question

Quizplus · Accepted Answer

When a company acquires a tangible long-lived asset, it may also inherit legal obligations associated with retiring the asset. According to GAAP, the company should recognize the obligation at its fair value as part of the initial cost of the asset. This ensures that the company accurately records the total cost of the asset and the corresponding obligations associated with it. Therefore, the best choice is A, which states that the company should recognize the obligation at fair value when the asset is acquired.

If a Company Incurs Legal Obligations Associated with the Retirement