The ARO is initially set up as in Example 1. At expiration of the lease, a new lease agreement is signed for the property, lasting another 10 years, and the ARO is transferred to the new lease. First set up the new lease. On the old lease’s ARO, set the Early Term Type to Transfer, date of January 31, 2033.
EZLease asks if it should set up the transfer addition on the new lease; choose Yes and select the new lease to receive the transfer. Save the old lease. Switch to the new lease and change the ARO end date to January 31, 2043. Save the ARO and choose Revision rather than Replace. The Net ARO shown is 393.43, which represents the original Net ARO of 6,832.04 less a reduction in present value of 6,438.61 when the end date is extended. Since the ARC is completely depreciated, a gain is recognized of 6,438.61 to balance the reduction in liability.