Daily Point 2081 - Asset Retirement Obligation (ARO)

 

The Banking Tutor

Daily Point 2081

Asset Retirement Obligation (ARO) 

In accounting, an asset retirement obligation (ARO) describes a legal obligation associated with the retirement of a tangible, long-lived asset, where a company will be responsible for removing equipment or cleaning up hazardous materials at some future date. 

AROs should be included in a company's financial statement to present a more accurate and holistic snapshot of the enterprise's overall value.

Companies are required to detail their AROs on their financial statements to accurately portray their overall values. 

Sekhar Pariti

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