Lack of Information
As indicated in the following memo, Lack of Information (LOI) has identified obligations to handle and dispose of asbestos upon retirement of several of its warehouses. Also as reflected in the memo, LOI has decided that it is not required to recognize any liabilities related to these obligations because it has asserted that the obligations are not probable or that it does not have sufficient information available.
For each identified obligation, determine whether you agree with LOI’s conclusion and discuss the basis for your determination.
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Case 10-4: Lack of Information
Audit Engagement Team
Controller, Lack of Information
ASC 410-20 — Asset Retirement Obligations Summary
December 31, 2010
Identification and Analysis of Potential Asset Retirement Obligations Lack of Information (LOI) owns and operates 50 warehouses throughout the country. As part of LOI’s efforts to identify potential asset retirement obligations, LOI’s internal audit group held interviews with all 50 of the warehouse managers and also performed site visits at each of the 50 locations. The related findings of the interviews and site visits noted the following facts:
25 of the warehouses contain asbestos; all but 2 of the warehouses reside in states that have laws in place that require the special handling and disposal of the asbestos when the building is demolished or otherwise significantly renovated. There are no other events that will require the removal and special handling and disposal of the asbestos, except as indicated in the third bullet below.
Regarding 10 of the 23 warehouses containing asbestos that reside in states with special asbestos handling and removal laws, LOI has plans to sell within the next five years and does not have plans to demolish or otherwise significantly renovate such...
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