A company records an asset retirement obligation (
A company records an asset retirement obligation (ARO) because of environmental damage. Which of the following will most likelyresult from the recording an ARO in any given year?
A. An increase in return on equity and an increase in depreciation expense
B. An decrease in return on equity and an increase in depreciation expense
C. An decrease in return on equity and an decrease in depreciation expense
参考解答
4j8***102
2024-11-15 00:57:11
Ans:B
Obligation associated with the retirement of tangible fixed assets are referred to as asset retirement obligations (AROs) and include costs for cleaning up the operating site and restoring it to pre-existing conditions, including rectifying any environmental damages.
ARO accounting requires companies to record an asset and a related liability for costs incurred to remedy environmental damage. The asset increase will result in an increase in depreciation expense that will reduce net income. Lower net income will reduce the company’s return on equity.
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