S. The FASB is independent of all other business and professional organizations. The body of rules and auditing standards created by the FASB is called Generally Accepted Accounting Principles (120).
This new rule requires businesses to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. FAS 143 applies to legal obligations associated with the retirement of a tangible long-lived asset. As such, if a company does not have a legal obligation to incur costs to retire an asset, the staff believes it is outside of the scope of SFAS 143. No costs should be recorded until a legal obligation arises or costs are actually incurred. In such situations, upon adoption of SFAS 143, any previously recorded accruals should be reversed. Cheri Mazza notes in CPA Journal that the scope of SFAS 143 does include legal obligations resulting from "the acquisition, construction, or development and (or) the normal operation of a long-lived asset" (paragraph 2). Legal obligations result from law, statute, ordinance, or contract, or arise from promissory estoppel. A contractual obligation normally requires an exchange of consideration. For obligations arising from promissory estoppel, a party cannot use the absence of consideration as a defense; that is, a valid contract may exist without the exchange of consideration if one party relied on a promise made by a