Asset Retirement Obligations Consulting Services

Aging infrastructure poses substantial public safety, financial, and reputational risks for the utilities, mining, oil and gas, and chemicals industries, as well as for public and private entities of all types. Proactive asset integrity management is necessary to deliver on organizational commitments to safe and reliable operations and to minimize liabilities.

One important aspect of asset integrity management is asset decommissioning, otherwise known as asset retirement. The associated liability is known as an asset retirement obligation (ARO). AROs include decommissioning-related costs resulting from normal operations that may occur during asset rebuilds, replacements, and retirements. The scope of such decommissioning includes components such as demolition, removal and disposal of hazardous materials, site restoration, and associated design, permitting, and engineering and regulatory oversight costs.

Generally Accepted Accounting Principles (GAAP)—as codified by the Financial Accounting Standards Board (FASB) for U.S. companies and International Accounting Standards Board (IASB) for non-U.S. companies, as well as the Government Accounting Standards Board (GASB) for government entities—requires entities to identify (“recognize”) AROs (FASB ASC 410-20, IASB IAS 37, GASB 83) and to use “fair value measurement” (an “arms-length” market valuation; FASB ASC 820) to quantify these liabilities. Exponent’s experience is that AROs are insufficiently identified and valued by many entities, and that opportunities exist to improve financial outcomes.

Exponent provides multi-disciplinary expertise to support the identification (“recognition”), valuation (“measurement”), and financial reporting (“disclosure”) of AROs and related tasks including:

  • Analysis/validation of AROs, e.g., assessing the variance between existing reporting and fair value measurement
  • Fair value measurement implementation, including updates to policies and practices
  • Portfolio valuation to prepare for strategic transactions (M&A, bankruptcy, spin-offs)
  • Development and refinements to risk registers and watch lists
  • Recoverability analysis and cost recovery strategic support (including utility rate recovery)
  • Facilitating engagement with diverse internal and external stakeholders
  • Benchmarking with industry peers.

Exponent’s ARO work benefits our clients by:

  • Preparing thorough ARO estimates in support of transactions, negotiations, and reporting
  • Daylighting blind spots to prevent surprises and anticipate change
  • Improving capital stewardship and cost recoveries
  • Enhancing rate recovery for AROs
  • Assisting with implementation of needed updates to policies and practices.

Exponent employs best practices from GAAP (as codified by the accounting standards boards noted above) and elaborated in industry consensus-based standard methods, including the following ASTM International standards (available at www.astm.org/Standard/index.html):

  • E3123-17 Standard Guide for Recognition and Derecognition of Environmental Liabilities
  • E2137-17 Standard Guide for Estimating Monetary Costs and Liabilities for Environmental Matters
  • E2173-16 Standard Guide for Disclosure of Environmental Liabilities
  • E2718-16 Standard Guide for Financial Disclosures Attributed to Climate Change
  • E3228-19 Standard Guide for Environmental Knowledge Management

Exponent’s application of these best practices and standard methods helps clients with:


  • Improved quality and completeness of analysis
  • Daylighting of uncertainties and assumptions and their significance
  • Consistency of approach across operations or a portfolio
  • Effective management and settlement of environmental liabilities.

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