Team Capex defines our recycling / e-waste service as the method of removing an asset from service, physically and on paper.
Recycling / E-waste service:
coordinating the removal of the capital asset
through properly managing the accounting systems associated with the asset through its ARO
while utilizing our vendor network to perform the physical recycling, repurposing, or disposal of the asset
Responsibility of our service:
To physically remove the capital asset
To dispose of the asset in the most environmentally friendly way possible
To manage the Asset Retirement Obligation
An Asset Retirement Obligation (ARO) is a legal obligation associated with the retirement of a tangible long-lived asset in which the timing or method of settlement may be conditional on a future event, the occurrence of which may not be within the control of the entity burdened by the obligation.
In the United States, ARO accounting is specified by Statement of Financial Accounting Standards (SFAS, or FAS) 143, which is Topic 410-20 in the Accounting Standards Codification published by the Financial Accounting Standards Board.
Entities covered by International Financial Reporting Standards (IFRS) apply a standard called IAS 37 to AROs, where the AROs are called “provisions”.
ARO accounting is particularly significant for remediation work needed to restore a property, such as decontaminating a manufacturing facility site, removing IT computer networking infrastructure or removal of improvements to a site.
It does not apply to unplanned cleanup costs, such as costs incurred as a result of an accident.
Firms must recognize the ARO liability in the period in which it was incurred, such as at the time of acquisition or construction.
The liability equals the present value of the expected cost of retirement/remediation.
An asset equal to the initial liability is added to the balance sheet, and depreciated over the life of the asset.
The result is an increase in both assets and liabilities, while the total expected cost is recognized over time, with the accrual steadily increasing on a compounded basis.