At the time the asset is acquired, an amount equal to the present value of the expected ARO cost is added to both fixed assets and liabilities. The asset component is depreciated overtime (makes sense to me) and the liability is increased. Why does liability increase overtime? Is it because of time-value?
ya, because it’s present value, so it’ll increase, and an accretion expense is charged
thanks, liaaba. that makes sense but I wanted to confirm.