In 2001, the Financial Accounting Standards Board (FASB), the organization charged with defining the standards for financial accounting for American business, issued Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations (generally known as FAS 143). It was issued to respond to diversity of practice in making provisions for expected and legally required future costs in decommissioning such varied assets as nuclear power plants, underground storage tanks, wells, mines, and leased property.
In this section, passages in quotation marks are taken directly from FAS 143, as amended (available on the FASB web site); the paragraph is shown in brackets. If another standard is referenced, its number is shown with its paragraph number in brackets. (The passages may also be found in the FASB’s new Accounting Standards Codification in topic 410.)
Entities complying with international financial reporting standards (IFRS) report AROs in accordance with the largely similar International Accounting Standard 37, Provisions, Contingent Liabilities and Contingent Assets. AROs are called “provisions” in that standard. Please see the section IAS 37 Differences for the few differences.