Question

Obligations associated with disposition of property, plant, equipment, or natural resources are called?

1) accumulated depreciation
2) asset retirement obligations
3) contra-asset-liabilities
4) nonrecurring fixed assets

Answer 1

Asset retirement obligations (AROs) are the legal obligations related to the disposition of long-lived assets, which must be settled by a company and are recognized under accounting standards such as US GAAP and IFRS.

Step-by-step explanation:

The obligations associated with the disposition of property, plant, equipment, or natural resources are referred to as asset retirement obligations (AROs). AROs are legal obligations associated with the retirement of a tangible, long-lived asset that a company is required to settle as a result of the asset's acquisition, construction, development, or normal operation. The accounting guidance for these obligations is generally found under US GAAP and IFRS standards. These require entities to recognize a liability for the fair value of the ARO when it is incurred and can be reasonably estimated. This liability will then be adjusted over time for the accretion of interest and any changes to the estimated cash flows.