# ASC 410-20-25: Asset Retirement and Environmental Obligations — Asset Retirement Obligations — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/410/20/#25-recognition) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T00:20:53.384Z to 2026-09-10T00:20:53.384Z Record version: sha256:5edcadf30368d9d3ef7dad5609b287fa19eb6e89d70e792139d3ae1605252d4e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 410-20-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/410/20/#25-recognition) SEC content: no #### Background for Recognition ##### [410-20-25-1](https://asc.understandingaccounting.org/asc/410/20/#410-20-25-1) Pending content: yes Source downloaded (UTC): 2026-09-10T00:20:53.384Z to 2026-09-10T00:20:53.384Z Record version: sha256:0d83668bc540ce3bc3a63c07ab9c7c50e6205bdee0c7ed3991c972edf485a66f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph 35 of FASB Concepts Statement No. 6, Elements of Financial Statements, defines a liability as follows {Note: The indented text below is reproduced from FASB Concepts Statement No. 6 and includes editorial changes for internal consistency within the Codification}. - Liabilities are probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. Transition date:(P) December 16, 2024; (N) December 16, 2025Transition guidance: [105-10-65-9](https://asc.understandingaccounting.org/asc/105/10/#105-10-65-9)
Editor's Note: Paragraph 410-20-25-1 will be will be superseded upon transition, together with its heading.
> Background for Recognition
[Paragraph superseded by Accounting Standards Update No. 2024-02.](https://asc.understandingaccounting.org/updates/asu-2024-02/) ##### [410-20-25-2](https://asc.understandingaccounting.org/asc/410/20/#410-20-25-2) Pending content: yes Source downloaded (UTC): 2026-09-10T00:20:53.384Z to 2026-09-10T00:20:53.384Z Record version: sha256:09fe1ebc612b67831d28a760f8319878f55cb83ee0ad5034327e656637e483a2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Probable is used with its usual general meaning, rather than in a specific accounting or technical sense (such as that in paragraph [450-20-25-1](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-1)), and refers to that which can reasonably be expected or believed on the basis of available evidence or logic but is neither certain nor proved (Webster's New World Dictionary). Its inclusion in the definition is intended to acknowledge that business and other economic activities occur in an environment characterized by uncertainty in which few outcomes are certain (see paragraphs 44 through 48 of FASB Concepts Statement No. 6). Transition date:(P) December 16, 2024; (N) December 16, 2025Transition guidance: [105-10-65-9](https://asc.understandingaccounting.org/asc/105/10/#105-10-65-9) [Paragraph superseded by Accounting Standards Update No. 2024-02.](https://asc.understandingaccounting.org/updates/asu-2024-02/) ##### [410-20-25-3](https://asc.understandingaccounting.org/asc/410/20/#410-20-25-3) Pending content: yes Source downloaded (UTC): 2026-09-10T00:20:53.384Z to 2026-09-10T00:20:53.384Z Record version: sha256:da3d2ab1f9fbfb7a6658d409d4288736a30e69428431d42041b161ee883cf977 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As stated in the preceding paragraph, the definition of a liability in Concepts Statement 6 uses the term _probable_ in a different sense than it is used in paragraph [450-20-25-1](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-1). As used in Topic 450, probable requires a high degree of expectation. The term probable in the definition of a liability, however, is intended to acknowledge that business and other economic activities occur in an environment in which few outcomes are certain. Transition date:(P) December 16, 2024; (N) December 16, 2025Transition guidance: [105-10-65-9](https://asc.understandingaccounting.org/asc/105/10/#105-10-65-9) [Paragraph superseded by Accounting Standards Update No. 2024-02.](https://asc.understandingaccounting.org/updates/asu-2024-02/) ##### [410-20-25-3A](https://asc.understandingaccounting.org/asc/410/20/#410-20-25-3A) Pending content: yes Source downloaded (UTC): 2026-09-10T00:20:53.384Z to 2026-09-10T00:20:53.384Z Record version: sha256:5d5698e3a540ca6a0b59cb88bce3fe5b9a13a048ef721f78066b503054b55c6b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [410-20-40-3](https://asc.understandingaccounting.org/asc/410/20/#410-20-40-3) states that providing assurance that an entity will be able to satisfy its asset retirement obligation does not satisfy or extinguish the related liability. Transition date:(P) December 16, 2024; (N) December 16, 2025Transition guidance: [105-10-65-9](https://asc.understandingaccounting.org/asc/105/10/#105-10-65-9) [Paragraph superseded by Accounting Standards Update No. 2024-02.](https://asc.understandingaccounting.org/updates/asu-2024-02/) #### Fair Value Is Reasonably Estimated ##### [410-20-25-4](https://asc.understandingaccounting.org/asc/410/20/#410-20-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:20:53.384Z to 2026-09-10T00:20:53.384Z Record version: sha256:6bd7fc363473dde37b4714c435d6c236c1c78aec03414b97cbc9f15f4118cfce Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall recognize the fair value of a liability for an [asset retirement obligation](https://asc.understandingaccounting.org/glossary/a/#asset-retirement-obligation "An obligation associated with the retirement of a tangible long-lived asset.") in the period in which it is incurred if a reasonable estimate of fair value can be made. If a reasonable estimate of fair value cannot be made in the period the asset retirement obligation is incurred, the liability shall be recognized when a reasonable estimate of fair value can be made. If a tangible long-lived asset with an existing asset retirement obligation is acquired, a liability for that obligation shall be recognized at the asset's acquisition date as if that obligation were incurred on that date. ##### [410-20-25-5](https://asc.understandingaccounting.org/asc/410/20/#410-20-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:20:53.384Z to 2026-09-10T00:20:53.384Z Record version: sha256:db49a7dd257f970a35353b2171a4e81a5a9635ac5901026f89b30155294949c2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Upon initial recognition of a liability for an asset retirement obligation, an entity shall capitalize an [asset retirement cost](https://asc.understandingaccounting.org/glossary/a/#asset-retirement-cost "The amount capitalized that increases the carrying amount of the long-lived asset when a liability for an asset retirement obligation is recognized.") by increasing the carrying amount of the related long-lived asset by the same amount as the liability. Paragraph [835-20-30-5](https://asc.understandingaccounting.org/asc/835/20/#835-20-30-5) explains that capitalized asset retirement costs do not qualify as expenditures for purposes of applying Subtopic 835-20. ##### [410-20-25-6](https://asc.understandingaccounting.org/asc/410/20/#410-20-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:20:53.384Z to 2026-09-10T00:20:53.384Z Record version: sha256:bb800a33b145e35f7c18f97061591dfda51bd1fcfa8f244f8b4ec436fc5a7ad4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall identify all its asset retirement obligations. An entity has sufficient information to reasonably estimate the fair value of an asset retirement obligation if any of the following conditions exist: 1. a It is evident that the fair value of the obligation is embodied in the acquisition price of the asset. 2. b An active market exists for the transfer of the obligation. 3. c Sufficient information exists to apply an expected present value technique. #### Obligations with Uncertainty in Timing or Method of Settlement ##### [410-20-25-7](https://asc.understandingaccounting.org/asc/410/20/#410-20-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:20:53.384Z to 2026-09-10T00:20:53.384Z Record version: sha256:daf881185329ba9763fd2386ca28945d6fcdca435ed3cf044d0adc3fa816e716 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement. Thus, the timing and (or) method of settlement may be conditional on a future event. Accordingly, an entity shall recognize a liability for the fair value of a [conditional asset retirement obligation](https://asc.understandingaccounting.org/glossary/c/#conditional-asset-retirement-obligation "A legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity.") if the fair value of the liability can be reasonably estimated. In some cases, sufficient information about the timing and (or) method of settlement may not be available to reasonably estimate fair value. An expected present value technique incorporates uncertainty about the timing and method of settlement into the fair value measurement. Uncertainty is factored into the measurement of the fair value of the liability through assignment of probabilities to cash flows. ##### [410-20-25-8](https://asc.understandingaccounting.org/asc/410/20/#410-20-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:20:53.384Z to 2026-09-10T00:20:53.384Z Record version: sha256:c847a974fa73abcb98b777cb87a704ec9ede065777a650f05282c84163a19fed Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity would have sufficient information to apply an expected present value technique and therefore an asset retirement obligation would be reasonably estimable if either of the following conditions exists: 1. a The settlement date and method of settlement for the obligation have been specified by others. For example, the law, regulation, or contract that gives rise to the [legal obligation](https://asc.understandingaccounting.org/glossary/l/#legal-obligation "An obligation that a party is required to settle as a result of an existing or enacted law, statute, ordinance, or written or oral contract or by legal construction of a contract under the doctrine of promissory estoppel.") specifies the settlement date and method of settlement. In this situation, the settlement date and method of settlement are known and therefore the only uncertainty is whether the obligation will be enforced (that is, whether performance will be required). In certain cases, determining the settlement date for the obligation that has been specified by others is a matter of judgment that depends on the relevant facts and circumstances. For example, a contract that provides the entity with an ability to extend its term through renewal should be evaluated to determine whether the settlement date should take into consideration renewal periods. Uncertainty about whether performance will be required does not defer the recognition of an asset retirement obligation because a legal obligation to stand ready to perform the retirement activities still exists, and it does not prevent the determination of a reasonable estimate of fair value because the only uncertainty is whether performance will be required. 2. b The information is available to reasonably estimate all of the following: 1. 1 The settlement date or the range of potential settlement dates 2. 2 The method of settlement or potential methods of settlement (The term _potential methods of settlement_ refers to methods of settling the obligation that are currently available to the entity. Therefore, uncertainty about future methods yet to be developed would not prevent the entity from estimating the fair value of the asset retirement obligation.) 3. 3 The probabilities associated with the potential settlement dates and potential methods of settlement. (The entity should have a reasonable basis for assigning probabilities to the potential settlement dates and potential methods of settlement to reasonably estimate the fair value of the asset retirement obligation. If the entity does not have a reasonable basis of assigning probabilities, it is expected that the entity would still be able to reasonably estimate fair value when the range of time over which the entity may settle the obligation is so narrow and (or) the cash flows associated with each potential method of settlement are so similar that assigning probabilities without having a reasonable basis for doing so would not have a material impact on the fair value of the asset retirement obligation.) ##### [410-20-25-9](https://asc.understandingaccounting.org/asc/410/20/#410-20-25-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:20:53.384Z to 2026-09-10T00:20:53.384Z Record version: sha256:96e3513609468e25c93e9cd5e21757a4baeb3483ef2d872d18710e123f947d73 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In many cases, the determination as to whether the entity has the information to reasonably estimate the fair value of the asset retirement obligation is a matter of judgment that depends on the relevant facts and circumstances. It is expected that the narrower the range of time over which the entity may settle the obligation and the fewer potential methods of settlement the entity has available to it, the more likely it is that the entity will have the information to reasonably estimate the fair value of an asset retirement obligation. For an illustration of this guidance, see Example 3 (paragraph [410-20-55-47](https://asc.understandingaccounting.org/asc/410/20/#410-20-55-47)). ##### [410-20-25-10](https://asc.understandingaccounting.org/asc/410/20/#410-20-25-10) Pending content: no Source downloaded (UTC): 2026-09-10T00:20:53.384Z to 2026-09-10T00:20:53.384Z Record version: sha256:6ee9e13c226482863029a0000e26efea7aa4dae8127cdc83fe5e98136aa3caf7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Instances may occur in which sufficient information to estimate the fair value of an asset retirement obligation is unavailable. For example, if an asset has an indeterminate useful life, sufficient information to estimate a range of potential settlement dates for the obligation might not be available. In such cases, the liability would be initially recognized in the period in which sufficient information exists to estimate a range of potential settlement dates that is needed to employ a present value technique to estimate fair value. ##### [410-20-25-11](https://asc.understandingaccounting.org/asc/410/20/#410-20-25-11) Pending content: no Source downloaded (UTC): 2026-09-10T00:20:53.384Z to 2026-09-10T00:20:53.384Z Record version: sha256:c7b236ac7d5c718a4ad42360e4d4e4f349c256a8946f6ef0633e844bf37b7306 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples of information that is expected to provide a basis for estimating the potential settlement dates, potential methods of settlement, and the associated probabilities include, but are not limited to, information that is derived from the entity's past practice, industry practice, management's intent, or the asset's estimated economic life. The estimated economic life of the asset might indicate a potential settlement date for the asset retirement obligation. However, the original estimated economic life of the asset may not, in and of itself, establish that date because the entity may intend to make improvements to the asset that could extend the life of the asset or the entity could defer settlement of the obligation beyond the economic life of the asset. In those situations, the entity would look beyond the economic life of the asset in determining the settlement date or range of potential settlement dates to use when estimating the fair value of the asset retirement obligation. ##### [410-20-25-12](https://asc.understandingaccounting.org/asc/410/20/#410-20-25-12) Pending content: no Source downloaded (UTC): 2026-09-10T00:20:53.384Z to 2026-09-10T00:20:53.384Z Record version: sha256:b8e0998ef03b58e0a201399f923a3dda37378fe165fc3c6d2c3f4e1262b8eafe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An asset retirement obligation may result from the acquisition, construction, or development and (or) normal operation of a long-lived asset that has an indeterminate useful life and thereby an indeterminate settlement date for the asset retirement obligation. ##### [410-20-25-13](https://asc.understandingaccounting.org/asc/410/20/#410-20-25-13) Pending content: no Source downloaded (UTC): 2026-09-10T00:20:53.384Z to 2026-09-10T00:20:53.384Z Record version: sha256:c387031cecb378a9895e0a73d2091b43b767719de8baeea173ccfc6ba2b062b8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a current law, regulation, or contract requires an entity to perform an asset retirement activity when an asset is dismantled or demolished, there is an unambiguous requirement to perform the retirement activity even if that activity can be indefinitely deferred. At some time deferral will no longer be possible, because no tangible asset will last forever (except land). Therefore, the obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement. #### Uncertainty in Performance Obligations ##### [410-20-25-14](https://asc.understandingaccounting.org/asc/410/20/#410-20-25-14) Pending content: no Source downloaded (UTC): 2026-09-10T00:20:53.384Z to 2026-09-10T00:20:53.384Z Record version: sha256:1963b65acb121eb7dd9afd355528e51455031238cdaeaaafb5cd6b3016201f51 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic requires recognition of a conditional asset retirement obligation before the event that either requires or waives performance occurs. Uncertainty surrounding conditional performance of the retirement obligation is factored into its measurement by assessing the likelihood that performance will be required. In situations in which the conditional aspect has only 2 outcomes and there is no information about which outcome is more probable, a 50 percent likelihood for each outcome shall be used until additional information is available. ##### [410-20-25-15](https://asc.understandingaccounting.org/asc/410/20/#410-20-25-15) Pending content: no Source downloaded (UTC): 2026-09-10T00:20:53.384Z to 2026-09-10T00:20:53.384Z Record version: sha256:bc14ee948bb9dfcc6fc964f6dfc6b8e23a9d048d78f8273563fffa5aa8cd90c3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An unambiguous requirement that gives rise to an asset retirement obligation coupled with a low likelihood of required performance still requires recognition of a liability. Uncertainty about the conditional outcome of the obligation is incorporated into the measurement of the fair value of that liability, not the recognition decision. Uncertainty about performance of conditional obligations shall not prevent the determination of a reasonable estimate of fair value. A past history of nonenforcement of an unambiguous obligation does not defer recognition of a liability, but its measurement is affected by the uncertainty over the requirement to perform retirement activities. #### Acquired Asset Retirement Obligations ##### [410-20-25-16](https://asc.understandingaccounting.org/asc/410/20/#410-20-25-16) Pending content: no Source downloaded (UTC): 2026-09-10T00:20:53.384Z to 2026-09-10T00:20:53.384Z Record version: sha256:bd428efbc5b140fe9cb8f7dc70354011d99e3b90c9f0f130449f349fee64659d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a tangible long-lived asset with an existing asset retirement obligation is acquired, a liability for that obligation shall be recognized at the asset's acquisition date as if that obligation were incurred on that date.