At some point after the initial setup of the ARO, you may conclude that the value needs to be changed, either because the estimated cost is incorrect, or the expected settlement (end) date of the ARO changes.
According to FAS 143, if the estimated cost decreases, the reduction should be recognized immediately, using the original risk-free rate to calculate the present value of the reduction. If the estimated cost increases, the current risk-free rate is used for the additional layer of cost. [¶15]
If the end date changes, the future value is recalculated, then the present value at the current date is calculated, and the ARO liability and ARC asset are both adjusted by the difference between the new present value and the previously recognized ARO liability. If the change is a reduction greater than the ARC net asset (including accumulated depreciation), then the asset is written down to zero, and a gain is recognized for the excess.
To make such a change, click on item in the ARO tree that represents the ARO layer that needs to be changed. The detailed information for that ARO displays. Click on Unlock Lease. Adjust the value or end date, as appropriate, and click Save Lease. EZLease generates a new revision to reflect the adjustment. If the change is to the value, a new layer is created. If the change is to the end date, a new revision is created.
Changing the payment/cost this way results in a recalculated value based on inflating the payment from the original begin date of the ARO. To adjust the estimated cost to a specific current value, compared to one or more ARO layers, use Revise ARO Estimate on the ARO menu.
The prior information for the ARO is maintained, both for audit purposes and so that the activity up to the present is properly recorded in future reports. The modified information for the ARO is stored in a new layer. Balance sheet accounts are adjusted to reflect the new terms, and the ARO continues with the new values.