Asset Retirement Obligation

This video explains how to account for an asset retirement obligation in the context of financial accounting. An example is presented to illustrate how an ARO is accounted for as well as the necessary journal entries.
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[@stephenbishopp10]

I've heard the periodic entry to increase ARO has a Debit to Accretion Expense instead of Interest Expense. Could you please explain this? Is the only explanation for this expense to increase the ARO to eventually become the future value of the obligation?

[@bin-ob]

Great explanation, but minor correction, it's called "accretion expense" not an interest expense because it's not a note or a bond. Thank you!

[@jonathanwieler8863]

I recommend all of your videos to my peers in college. You do SUCH a good job teaching these concepts!

[@mspolicecall]

This holds hands with my intermediate accounting by Gordon and raedy textbook

[@MyFinancialFocus]

I love how just studying accounting introduces me to all of the things that bigger businesses go through.

[@jayceebalanag6511]

how do you do that?

[@velianadwiamelinda9680]

how do you do that?

[@user-yn5ol4er9m]

how do you do that?

[@hcamry]

Thank you. But what I dont understand is why is there an ARO asset in the first place. Lets say I build a factory for $500k. Then later I realize there is an ARO liability in the future costing $2 million after 10 years. So would there be an additional ARO asset also with pv of $2 million in addition to the asset? Couldnt there not be a contra liability instead to balance them out. It doesnt make sense (i know it is gaap but i think it doesnt make sense)

[@samuelkwon5824]

So essentially, we figure out what the cost is to retire the asset, and accrue the ARO as a liability account to that amount (accrued through interest expense cap), and then retire Db. ARO Cr. Cash and record the gain or loss if any. The question I have is what is the interest expense rooted in? A loan we took out to buy the asset?

[@MyteeBumbleBee]

Thank you...THANK YOU! I just needed a simplified and detailed explanation without all the double babble I kept encountering from the published statements online. I understand how this concept works and the instructor's explanation with a perfect example was exactly what I needed. Thank you so much! I'm a subscriber now!

[@godofwar2060]

Thanks for the help. I was having a hard time with this!

[@leahk7057]

Thank you very much for your great video!

[@raviagarwal2793]

Too good and simply explained. Thanking you for every video you have uploaded for such concept explanations.

[@lithtanumi3874]

Great explanation! Thank you.

[@gabriellaann4426]

GREAT VIDEO THANK YOU!

[@metincaglar5798]

Great explanation. Thank you for all videos.

[@Msgoodpuppy247]

Thank you!! This was very helpful! I was stuck on this part while studying for my CPA exam

[@rawanalzubi6144]

This is an amazin explanation, Thanks a lot !

[@Silmeria0724]

I just discovered your videos and they are awesome! Thank you so much!! I`ve been using them in conjunction with my online classes.