Thank you...THANK YOU! I just needed a simplified and detailed explanation without all the double babble I kept encountering from the published statements online. I understand how this concept works and the instructor's explanation with a perfect example was exactly what I needed. Thank you so much! I'm a subscriber now!
I've heard the periodic entry to increase ARO has a Debit to Accretion Expense instead of Interest Expense. Could you please explain this? Is the only explanation for this expense to increase the ARO to eventually become the future value of the obligation?
Thank you. But what I dont understand is why is there an ARO asset in the first place. Lets say I build a factory for $500k. Then later I realize there is an ARO liability in the future costing $2 million after 10 years. So would there be an additional ARO asset also with pv of $2 million in addition to the asset? Couldnt there not be a contra liability instead to balance them out. It doesnt make sense (i know it is gaap but i think it doesnt make sense)
So essentially, we figure out what the cost is to retire the asset, and accrue the ARO as a liability account to that amount (accrued through interest expense cap), and then retire Db. ARO Cr. Cash and record the gain or loss if any. The question I have is what is the interest expense rooted in? A loan we took out to buy the asset?
Remember that the ARO is recorded in it's present value calculation. It's not based off a loan but an obligation we agreed to when we signed a contract or lease. A better name for interest expense is accretion expense which is the cost associated with an increase in a liability’s carrying value over time
So if I'm correct, the Gain at settlement will be reflected on the balance sheet at year end as an asset? The other would be income statement, and be reflected as "Other Income." Answers, thoughts.
Per PWC, "For transactions in which the asset or service surrendered is not the reporting entity’s normal product or service, recording the transaction as other income is appropriate. "
ARO Interest Exp Present Value Jan-1-2017 - 375,657 Dec-31-2017 37,566 413,223 Dec-31-2018 41,322 454,545 Dec-31-2019 45,455 500,000 To calculate the interest expense, multiply the discount rate by the current present value of the ARO.
I recommend all of your videos to my peers in college. You do SUCH a good job teaching these concepts!
I love how just studying accounting introduces me to all of the things that bigger businesses go through.
Thank you...THANK YOU! I just needed a simplified and detailed explanation without all the double babble I kept encountering from the published statements online. I understand how this concept works and the instructor's explanation with a perfect example was exactly what I needed. Thank you so much! I'm a subscriber now!
I just discovered your videos and they are awesome! Thank you so much!! I`ve been using them in conjunction with my online classes.
Fantastic...Best of luck to you in your studies!
I just discovered this channel. Life saver tutorial ! Thank you
Happy to help!
Too good and simply explained. Thanking you for every video you have uploaded for such concept explanations.
Thanks for the help. I was having a hard time with this!
Thank you so much for this videos. AROs did not make sense to me before, now they are simple & easy to understand. Very helpful.
Thanks Pamela!
Great explanation. Thank you for all videos.
Thank you!! This was very helpful! I was stuck on this part while studying for my CPA exam
I can't believe it can be this good
Great explanation, but minor correction, it's called "accretion expense" not an interest expense because it's not a note or a bond. Thank you!
This holds hands with my intermediate accounting by Gordon and raedy textbook
Happy to help!
This was amazingly helpful, thank you so much!
Glad it was helpful!
This is an amazin explanation, Thanks a lot !
I've heard the periodic entry to increase ARO has a Debit to Accretion Expense instead of Interest Expense. Could you please explain this? Is the only explanation for this expense to increase the ARO to eventually become the future value of the obligation?
ASPE
great video thanks
GREAT VIDEO THANK YOU!
Thank you very much for your great video!
Great explanation! Thank you.
Thank you so much. You are a life saver
Thank you. But what I dont understand is why is there an ARO asset in the first place. Lets say I build a factory for $500k. Then later I realize there is an ARO liability in the future costing $2 million after 10 years. So would there be an additional ARO asset also with pv of $2 million in addition to the asset? Couldnt there not be a contra liability instead to balance them out. It doesnt make sense (i know it is gaap but i think it doesnt make sense)
h corolla I agree.
Thank you!
Thank you for making this video.do u have video on participation of dividends? I didn't find that in your playlist.
Great video! well explained
great video!!
very helpful video
So essentially, we figure out what the cost is to retire the asset, and accrue the ARO as a liability account to that amount (accrued through interest expense cap), and then retire Db. ARO Cr. Cash and record the gain or loss if any. The question I have is what is the interest expense rooted in? A loan we took out to buy the asset?
Remember that the ARO is recorded in it's present value calculation. It's not based off a loan but an obligation we agreed to when we signed a contract or lease. A better name for interest expense is accretion expense which is the cost associated with an increase in a liability’s carrying value over time
So if I'm correct, the Gain at settlement will be reflected on the balance sheet at year end as an asset?
The other would be income statement, and be reflected as "Other Income."
Answers, thoughts.
Per PWC, "For transactions in which the asset or service surrendered is not the reporting entity’s normal product or service, recording the transaction as other income is appropriate. "
thank you it makes sense
What amount would be the ARO for interest expense in 2018 and 2019?
ARO Interest Exp Present Value
Jan-1-2017 - 375,657
Dec-31-2017 37,566 413,223
Dec-31-2018 41,322 454,545
Dec-31-2019 45,455 500,000
To calculate the interest expense, multiply the discount rate by the current present value of the ARO.
Shouldn't depreciation be the ARO+assets value/useful life?
great !
very helpful
how do you do that?
very helpful
how do you do that?
how do you do that?