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ACCRUED CLOSURE COSTS AND ASSET RETIREMENT OBLIGATIONS (ARO)
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Dec. 31, 2013
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| ACCRUED CLOSURE COSTS AND ASSET RETIREMENT OBLIGATIONS (ARO) [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACCRUED CLOSURE COSTS AND ASSET RETIREMENT OBLIGATIONS (ARO) |
NOTE 10
ACCRUED CLOSURE COSTS AND ASSET RETIREMENT OBLIGATIONS (“ARO”)
Accrued closure costs represent our estimated environmental liability to clean up our fixed-based regulated facilities as required by our permits, in the event of closure. Accounting Standards Codification (“ASC”) 410, “Asset Retirement and Environmental Obligations” requires that the discounted fair value of a liability for an ARO be recognized in the period in which it is incurred with the associated ARO capitalized as part of the carrying cost of the asset. The recognition of an ARO estimate is inflated, using an inflation rate, to the expected time at which the closure will occur, and then discounted back, using a credit adjusted risk free rate, to the present value. AROs are included within buildings as part of property and equipment and are depreciated over the estimated useful life of the property. In periods subsequent to initial measurement of the ARO, the ARO is adjusted at the end of each period to reflect the passage of time (as accretion expense) and changes in the estimated future cash flows underlying the obligations (capitalized to the associated ARO and depreciated in accordance with the Company’s deprecation policy).
Changes to reported closure liabilities for the years ended December 31, 2013 and 2012, were as follows:
The adjustment in 2013 was made principally to record the obligation using appropriate discount rates. The obligations were previously based on undiscounted values. The associated assets were also adjusted to reflect this change. The net impact of the adjustment to pretax loss from operations was approximately ($448,000) in 2013. The decrease in closure accrual in 2012 included approximately $773,000 of costs incurred in connection with the closure of a processing unit at our PFNWR facility.
The reported closure asset or ARO, is reported as a component of “Net Property and equipment” in the Consolidated Balance Sheet for the years ended December 31, 2013 and 2012 as follows:
The adjustment to the ARO for 2013 was due to the adjustment made to our closure accrual as discussed above.
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