Final answer:
Subsequent measurement of an Asset Retirement Obligation (ARO) differs between ASPE and IFRS, with the main difference being in how the initial liability is recognized and later adjusted as conditions change. Both standards require accretion of the liability over time and adjustments to the associated asset.
Explanation:a
The subsequent measurement of an Asset Retirement Obligation (ARO) varies depending on the accounting standard being used. Under the Accounting Standards for Private Enterprises (ASPE), AROs are initially measured at fair value and then accreted over time using a credit-adjusted risk-free rate. The accretion expense is recognized in earnings. Under International Financial Reporting Standards (IFRS), AROs are initially recognized at the present value of the estimated dismantlement or removal cost, which is then accreted over time to the full amount of the obligation. Adjustments to the liability can be from changes in the timing or amount of the expected cash flow or from changes in the discount rate.
Under both ASPE and IFRS, the associated asset is also adjusted for changes in the ARO. For IFRS, it is adjusted as part of the carrying amount of the related asset and depreciated. Under ASPE, the change is capitalized to the related asset or expensed if the asset cannot be measured directly. Overall, subsequent measurement of ARO under both ASPE and IFRS involves adjusting the liability as new information becomes available and is influenced by changes in estimates or market conditions.