GASB 83 guidance for public utilities

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Adapting to the “new” normal

March 2019

The Governmental Accounting Standards Board Statement No. 83, Certain Asset Retirement Obligations requires public power companies and other governmental entities to identify and value asset retirement obligations. For periods after June 15, 2018, those entities must record a liability and corresponding deferred outflow of resources for the current value of outlays expected to be incurred for those tangible capital assets that the entity has a legal obligation to perform asset retirement activities.

Public power entities have the opportunity learn from the challenges that their investor-owned peers have faced doing their own ARO accounting. These challenges have included effectively managing the estimation process to meet the needs of operational members of the team who are key to inputs as well as accounting and control requirements for the financial reporting of the obligation.

GASB 83 retired assets

Key points to consider

  1. Collaboration across the company: The accounting reporting for AROs is not limited to the finance / accounting function. The initial and ongoing evaluation and measurement requires input from operations, legal, regulatory and the accounting / finance function.
  2. Potential for AROs measured under different methods: An entity may need to evaluate its disclosures and reporting if it has AROs arising from a jointly owned plant with non-governmental entities when the entity is a minority owner. Those AROs would be measured under the FASB method used by the other owner. The entities other AROs would be measured under GASB 83.
  3. Subsequent measurement: In performing the initial measurement, the entity should determine what the key factors driving the valuation to allow for annual assessment of significant changes in estimated outlays that would require re-measurement beyond the annual adjustment for inflation.
  4. Regulatory impact: GASB 83 provides that a corresponding deferred outflow of resources be recorded for the ARO. Regulated businesses need to evaluate if some or all of the amounts recorded as a deferred outflow of resources would be eligible for regulatory accounting and inclusion as a regulatory asset.
  5. Change process: Entities will need to have a strong process in place for monitoring for changes which will require re-measurement. The pace of change in the business of early retirements of large baseload plants and the evolving cost to remove will drive the need for strong internal processes involving key functional areas.

How PwC can help

PwC’s Complex Accounting & Regulatory Support Services (CARSS) practice is dedicated to helping regulated companies in the energy, power and utility industries manage their regulatory risk and help solve their complex accounting problems related to regulatory accounting. Our seasoned team has deep experience working with regulated entities and their regulators, and can help companies reduce risk and achieve optimal outcomes related to interactions with regulators.

Contact us

Christopher Lorenz

US Energy Utilities and Mining Managing Director, PwC US

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