By Erika Mathieu
Sunny South News
Lethbridge County has adopted a policy concerning asset retirement obligations (AROs) as outlined by the Public Sector Accounting Standards Board, (PSAB) Section 3280. This PSAB regulation was first issued in Aug. 2018 and will come into effect for fiscal years beginning on or after April 1, 2022.
PSAB Section 3280 is applicable to entities in the public sector which adhere to the Public Sector Accounting Standards (PSAS). County administration held discussions on this standard in the spring of 2023 with the County’s auditors KPMG. Lethbridge County’s, director of finance and administration, Jennifer Place said administration will continue work to ensure the timely implementation of ARO reporting for the financial statements for 2023, adding that administration is working with a third-party to assess the AROs and determine the associated costs for reporting purposes. A budget of $50,000 was previously approved for this initiative, utilizing MSI operating funds.
The policy aims to establish guidelines for the accounting treatment of AROs to ensure that the financial reports accurately reflect the information about these assets and their end-of-life obligations. The key issues and accounting considerations for AROs revolve around their recognition and measurement. The policy also outlines the scope of application and provides a breakdown of AROs, utilizing existing laws and regulations to determine the County’s liabilities.
“Eventually, when all assets have been evaluated, these liabilities will be reflected on the financial statements,” said Place.
While there are numerous potential liabilities, administration used the example of asbestos during the council meeting. Using the presence of asbestos as an example, County administration would look into specific details related to building construction dates to determine if there may be asbestos present in County-owned properties.
Place explained, “Currently, there are funds allocated in the budget for AROs, as previously approved for the 2023 budget. We are in discussions with an engineering company to determine which assets are affected by ARO calculations and how to assess the corresponding liabilities, considering factors like asbestos or other contaminants.”
Place clarified that if the AROs fall within the legislation, they will need to be recorded.
Councillor Van Essen raised a concern, asking if the year-end financial statements would appear as if the county is losing money or if this impact would be separate from the budget. Place responded, “If we were to sell a building with a recorded liability, the liability would be deducted from the proceeds of the sale. However, it won’t have an impact on our overall budget or cash flows.”
The policy regarding AROs was subsequently approved.