As indicated in the following memo, Lack of Information (LOI) has identified obligations to handle and dispose of asbestos upon retirement of several of its warehouses. Also as reflected in the memo, LOI has decided that it is not required to recognize any liabilities related to these obligations because it has asserted that the obligations are not probable or that it does not have sufficient information available.

Applicable Professional Pronouncements

• ASC 410-20-25, Asset Retirement and Environmental Obligations: Asset Retirement Obligations (FASB Statement No. 143, Accounting for Asset Retirement Obligations (Statement 143), and FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (Interpretation 47))
• ASC 450-20, Contingencies: Loss Contingencies (FASB Statement No. 5, Accounting for Contingencies (Statement 5))

Required

LOI has concluded that none of the three scenarios requires it to record an asset retire obligation for removal of hazardous material.

Explain why LOI is incorrect for each of the three situations below, and that an asset retirement obligation must be recorded:

1. Ten warehouses that will likely be sold before being required to remove the asbestos
2. Two warehouses in states without special asbestos handling and disposal laws.
3. Thirteen warehouses for which the settlement date is indeterminate.

4. Lack of information has concluded that none of the three scenarios requires it to record an asset retire obligation for removal of hazardous material

Answer rating: 100% (QA)

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