Volume 5, No. 5


Cradle To Grave Accounting For Long-Lived Assets:  Removing assets from service is not always as simple as trading in a copier or a car for a new one. The problems - and costs - involved in decommissioning a nuclear reactor or closing down a copper mine are substantial and often recognizable years in advance of the asset's closure. Companies have used various methods to recognize the liabilities involved in dealing with the end of such assets' useful lives. There is not much consistency to the methods used by companies in different industries, even though the issues faced by companies in various industries are fundamentally similar. Current practices can understate assets and liabilities, and provide warped measures of performance like return on assets and return on equity. A proposed standard by the Financial Accounting Standards Board could provide a consistent, comparable methodology for firms to follow.


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