The Financial Accounting Standards Board (FASB) published two exposure drafts in June, 2004:

Conditional Asset Retirement Obligations
Fair Value Measurements

Conditional Asset Retirement Obligations

Accounting for Conditional Asset Retirement Obligations, an Interpretation of FASB Statement No. 143, responds to the diverse accounting practices that have developed with respect to the timing of liability recognition for conditional asset retirement obligations. The proposal seeks to provide more consistent recognition of liabilities relating to asset retirement obligations and more information about future cash outflows relating to these obligations.

The exposure draft clarifies that a legal obligation to perform an asset retirement activity that is conditional on a future event is within the scope of Statement No. 143. Under the Board’s proposal, an entity would be required to recognize a liability for the fair value of an asset retirement obligation that is conditional on a future event if the liability’s fair value can be estimated reasonably.

The ability of an entity to indefinitely defer settlement of the obligation or the ability of an entity to sell the asset prior to its retirement does not relieve an entity of the obligation. Uncertainty surrounding the timing and method of settlement that may be conditional on events occurring in the future would be factored into the measurement of the liability rather than the recognition of the liability.

The proposal would be effective no later than the end of the fiscal years ending after December 15, 2005 (December 31, 2005 for calendar-year enterprises). The comment period for the exposure draft ends August 1, 2004.

Fair Value Measurements

An exposure draft published June 23, 2004, Fair Value Measurements, seeks to establish a framework for measuring fair value that would apply broadly to financial and non-financial assets and liabilities, improving the consistency, comparability and reliability of the measurements. The fair value framework would clarify the fair value measurement objective and its application under other authoritative pronouncements that require fair value measurements. Thus, the Exposure Draft would replace any current guidance for measuring fair value in those pronouncements.

The Exposure Draft also would expand current disclosures about the use of fair value to measure assets and liabilities. The disclosures focus on the methods used for the measurements and would apply whether the assets and liabilities are measured at fair value in all periods such as trading securities or in only some periods such as impaired assets.

The comment period for the Exposure Draft ends September 7, 2004. The Board plans to hold a public roundtable meeting in September 2004 to gather additional input.

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