Which of the Following Statements Is INCORRECT Regarding the Recording

question 60

Multiple Choice

Which of the following statements is INCORRECT regarding the recording of the related increase or accretion in the carrying amount of an asset retirement obligation (ARO) ?

• A)Under ASPE, it is recognized as interest expense.
• B)Under ASPE, it is recognized as an operating expense (but not as interest expense).
• C)Under IFRS, it is recognized as a borrowing cost.
• D)The amount should be calculated using the same discount (interest rate)as was used
• To calculate the initial present value of the ARO.

---

Definitions:

Risk of Obsolescence

The potential for a product or technology to become outdated or less valuable due to advancements in technology, changes in consumer preferences, or market developments.

Executory Costs

Costs associated with maintaining and operating leased property, such as insurance, maintenance, and taxes, often shared by lessee and lessor.

Lease Transaction

An agreement where a lessor allows a lessee to use an asset in exchange for payment over a predetermined period.

Capital Lease

A lease classified as an asset purchase for accounting purposes, where the lessee assumes some of the risks and benefits of ownership.