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The Curious Bag
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<h4 class="dechead">On One Hand: There Is An Impact.
Retiring an asset can effect both the balance sheet and the income statement. Financial Accounting Standards Board (FASB) statement 143 requires entities to recognize asset retirement obligations at their fair value at the point when an obligating event takes place. If there is a difference between the asset retirement liability balance and the actual retirement costs, it flows through the income statement as a gain or loss on retirement.
On the Other: The Impact May Not Affect Income.
If the asset retirement liability balance and the actual retirement costs are equal, there will be no effect on income; the impact will be totally on the balance sheet. There will always be an impact on the balance sheet because liability accounts and cash are balance sheet accounts.
Bottom Line
Retiring an asset will always have an impact in accounting because it requires adjusting entries to the books of account (accounting records). There may or may not be any effects on income. If there is an effect on income, it can be either a gain or loss on retirement, depending on the amount of actual retirement costs.
Source:
Journal of Accountance: Accounting for Asset Retirement Obligations
The CPA Journal: Accounting for Asset Retirement Obligations
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