Asset Retirement Obligations (ARO) Disclosure Report - Product Advisory

Note: The information in this document represents LeaseAccelerator’s understanding of the requirements for the ARO Disclosure Report. There may be line items where there are different opinions and guidance as to what should or should not be included. Companies should review the below in conjunction with their technical accounting advisors and make any manual adjustments to the system generated report as needed.

Business Summary

The ASC 820 and IAS 37 Accounting Standards require disclosures of a Lessee’s Asset Retirement Obligations (ARO) which the Lessee must present in their quarterly and annual financial statements. The disclosure for a specific reporting period should include the following:

Beginning Balance
Additional liabilities incurred (at discounted cash flow value)
Less liabilities settled
Plus accretion expense
Ending Balance

LeaseAccelerator has created an ARO Disclosure Report to assist in providing the information required for disclosure. While other disclosure reports focus on either a forward-looking (Maturity Analysis/Contractual Obligations) or backward-looking (Quantitative Analysis) view, this report has been designed to provide a combination of both. The report output includes the prior year, current year, and estimated subsequent years.

Important: The initial deployment of the ARO Disclosure Report provides reporting on an annual basis. Quarterly and monthly options will be addressed in a future release.

This report will address the Asset Retirement Obligations (ARO) associated with the Return to Original Condition/Refurbishment categories. If the ARO component is combined with the ROU asset, lease liability or expense, then it is excluded from this report since it is already included in the Quantitative Analysis Report. If the ARO components are standalone accounts, then they are included in this ARO Disclosure Report.

Also note that while the report can be generated in functional currency and reporting currency, it does not perform the secondary functional remeasurement in which the Gain/Loss FX Remeasurement is created. Therefore, due to the roll forward format of the report, a balance (either positive or negative) may remain at the end of the life of the lease which is related to the functional or reporting remeasurement/translation.

Generating the Report

The ARO Disclosure Report is located on the Accounting tile in the Reporting workspace. The report is available to LA Staff and Power User by default. The report submission screen is shown below along with a description of the fields:

Report Parameter Definitions

Field	Description
As At	This represents the end of the current fiscal period. Activities recorded with the ledger date on or before this date will be included. Activities recorded with ledger date after this date will not be included. This is a REQUIRED FIELD. For reporting currency translation, the Spot rate at As At date is used for the Starting Fiscal Year and future years.
Starting Fiscal Year	The fiscal year that the current period belongs to. This is a REQUIRED FIELD.
Starting Period	The fiscal period for the report. Current option is Full Year. This is a REQUIRED FIELD.
Exclude Tags	Some customers apply tags to schedules such as InterCompany, Land Only, etc. This option allows the exclusion of tagged schedules for reporting purposes. The field is freeform text. Multiple tags may be included in the selection using standard separator of comma no space. For example, users can exclude Deals with a tag of either “LAND ONLY” and “Reviewed” by entering LAND ONLY,Reviewed. Syntax must be EXACTLY as configured; otherwise reports will not generate the expected results.
Lessee	Available filter of customer-defined Lessees via drop-down menu.
Schedule Number	Available filtering on a single or multiple specific schedule(s). The wildcard character () can be used to isolate a specific group of schedules. For example, Fin would select all schedules that begin with “Fin”.
Report Using	Transactional/Functional/Reporting – Selection drives the currency type used for the report. This is a REQUIRED FIELD with a default of Reporting. Note: If Transactional or Functional is selected, a warning will appear explaining that the “Show Deals Denominated In” field (below) must also be selected.
Show Deals Denominated In	Filter to determine which currency should be used for the “Report Using” (above) selection. When “Report Using” is set to Transactional, the report will include schedules denominated in the selected currency. When “Report Using” is set to Functional, this selection will render schedules associated with entities that have been assigned the selected functional currency. When “Report Using” is set to Reporting, this selection will default to the reporting currency defined during the environment configuration.
Country	Available filter of customer-defined countries (GEOs) via drop-down menu.
Entity	Available filter of customer-defined Entities via drop-down menu.
Business Unit	Available filter of customer-defined Business Units via drop-down menu.
Cost Center	Available filter of customer-defined Cost Center. This is a freeform text field so syntax must be exactly as configured. Only one cost center can be selected.
11 GL Segments	You may filter this report by identifying the ledger code associated with each segment. Only one value is allowed per segment. Some customers utilize a portion(s) of the overall G/L string to segregate data by location, product type, sub-units etc. These fields allow for this type of filtering. These are freeform text fields, so entry must reflect exactly what appears in the system and in the correct G/L segment field (labeled 1 through 11).
Set of Books	Filters customer ledgers via drop-down menu. This is a REQUIRED FIELD.

This report can be scheduled to generate in the future. This can be a single occurrence or at specified recurring intervals. More information regarding report scheduling can be found in the “Overview of Reports” video in Ask Alex.

Report Output

The below table summarizes the key items included on the details tab for each lease contract. The summary table aggregates the detail tab which contains schedule level information. The report calculates these amounts based on the specific parameters requested as described in the previous section. The summary tab of the report also includes various control totals.

The first year listed in the detail section is equal to the year prior to the selected “Starting Fiscal Year”. The second year is equal to the “Starting Fiscal Year” and so on.

Example:

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Report Line Item – Details Tab	Explanation	Ledger Export Validation by Account
Current Liability Balance (Represents the Schedule Level Liability balance)	The Lease Liability by lease as of the As At date and includes the following account balances: Lease Obligation – ST Lease Obligation – LT Purchase Option Liability Guaranteed Residual Liability	Sum of entries at As At date for: Operating Lease Obligation – ST Operating Lease Obligation – LT Finance Lease Obligation – ST Finance Lease Obligation – LT Purchase Option Liability Guaranteed Residual Liability
CARFR (Credit Adjusted Risk Free Rate) Note: LeaseAccelerator currently does not store this as a separate rate but will make this available in a future release.	Future Enhancement	N/A
CARFR Take-Down Type Note: LeaseAccelerator currently does not store this as a separate rate but will make this available in a future release.	Future Enhancement	N/A
Year 20## Beginning Balance	ARO Liability from beginning of lease until the end of the previous fiscal year. After the first year, each Beginning Balance equals the previous year’s ending balance.	Sum of ARO Liability entries from beginning of lease until the end of the previous year.
Year 20## New Additions	New ARO liabilities created during the specified year.	New ARO Liability takedown entries only (represented by posting codes 141.4, 191.4, 191.5, 241.4 & 291.4).
Year 20## Accretions	ARO accretions occurring during the specified year.	ARO Liability accretion entries (represented by posting codes 142.4, 192.4, 242.4 & 292.4).
Year 20## Settlements	ARO liabilities that were resolved/settled during the specified year.	ARO Liability payment entries (represented by posting codes 325.1, 330.1, 335.1 & 340.1).
Year 20## Net Remeasurements	The net change in the ARO liability due to remeasurement events occurring during the specified year. For modified schedules, the takedown amounts for the new “Mxxx” schedule will appear in this column.	ARO Liability entries for closing out the initial liability along with newly created ARO Liability entry (represented by posting codes 141.4, 191.4, 191.5, 241.4, 291.4, 325.2, 330.2, 335.2 & 340.2).