What is the purpose of the exemption in paragraph 1500.24 regarding asset retirement obligations?
Section 3110, Asset Retirement Obligations, requires an enterprise to recognize and calculate the obligation in the period in which it is incurred, with initial recognition resulting in an increase to the cost of the related asset. Paragraph 1500.24 allows an enterprise that did not previously recognize asset retirement obligations on a basis consistent with Section 3110 to calculate the obligation at the date of transition. That is, the enterprise would not have to reconstruct the obligation as of a previous date, ‘bump’ the carrying amount of the related asset and subsequently amortize the ‘bump’ for periods prior to the date of transition. This exemption is not available to enterprises that previously recognized asset retirement obligations on a basis consistent with Section 3110 as such enterprises would already have recognized the obligation and the ‘bump’ in previous financial statements.
