You may change an ARO to reflect a revision of estimates, a lease renewal, or other situations. To do so, click on its title in the box at the left of the ARO tab. The ARO is displayed in the input boxes. Make any needed changes, and click Save ARO. You may choose whether the change should result in a revision of the ARO, or simply replace what’s currently there.

You may always replace the current values of an ARO, but doing so in a later fiscal period than the one the ARO was originally booked will cause reports to be inconsistent with those previously run. If you choose to treat the change as a revision, the following is the effect of making changes in each input field:

Name: Changes are reflected immediately.

Begin Date, Inflation Rate, Risk-Free Rate: May not be changed for an existing ARO. If you have entered one of these incorrectly and you have already booked the ARO, you must terminate it and replace it with a new, corrected record.

Useful Life: If the end date matches the Useful Life, any change to Useful Life results in a change to the end date. If Economic Penalty testing is selected, the underlying lease will potentially be extended if options exist and the minimum useful life is longer than the existing life to the end of the lease. Options are never derecognized due to a shorter ARO life.

Current payment and probability:

• If the payment changes and the probability does not change, an incremental ARO record is created to reflect the difference (positive or negative). Such a incremental record is treated at inception as an addition or termination to the ARO and ARC.

• If the payment does not change and the probability changes, an incremental record is created. If the probability increases, the incremental record has the same payment, and the probability value is the difference between old and new. If the probability decreases, the payment is the negative of the original payment, and the probability value is the difference between old and new.

• If both the payment and the probability change, an incremental record is created; if the probability increases, the new probability level is used, and an appropriate payment is calculated to get the correct overall result. If the probability decreases, the new record shows as the probability the amount of change (always positive), and an appropriate payment is calculated to get the correct overall result.

According to FAS 143, if a change to the payment or probability results in an increase in the ARO, the increase should be present valued using the current risk-free rate. If the ARO decreases, the decrease should be present valued using the original risk-free rate. EZLease reminds you if you have not already changed the rate.

End date: The ARO is recalculated as of the booking date entered, and both the liability and asset are adjusted accordingly. Each change in the end date is shown in the display table at the lower right of the ARO tab, which also displays the updated Future and Net ARO values.