LOI wants to dispose off some of its warehouse that contains asbestos materials; he does not have sufficient information concerning the law guiding the retirement obligation of assets. Some of the LOI assets are located in states where law concerning disposal of asbestos materials is in force. While the other assets are in states where there are no such laws. Secondly, LOI assets contain asbestos; before such assets are disposed off, the law regarding such disposers should be adhered to strictly.
Asbestos contain very dangerous chemical that causes diseases to human beings. The chemical can get into human blood system when the fibers are disposed into the air or environment and inhaled. In Gerrard, the effect is long term but is very serious to human health as it can cause cancer, mesothelioma and other dangerous diseases of the lungs (120). When disposing the waste, a strict rule should be followed to limit it’s the asbestos chemical effect to environment.
Even though there are only two warehouses for LOI that reside in states where asbestos handling and disposal law exists, the parties handling the asbestos should the asbestos with care for their own safety. Asbestos materials are then put in leak free containers and sealed tightly. This will provide safety for the environment and people living around. This is noted by Reitze, in the countries where there is law governing the handling and disposal, the asbestos; they should be wetted then sealed tightly in leak free containers. The containers need to be labeled as required by DOS, OSHA, DOT, Mass DEP and EPA. “DENGAROUS: ASBESTOS”.
In the disposal of these asbestos materials, the regulated law on special waste has to be adhered to strictly (102). They should be disposed off in approved landfill, a place where all the wastes containing asbestos materials are accepted to be disposed off by the law (Smith, 305).
LOI will dispose the 10 of the 25 warehouses within five years; here the law requires that, all the tangible long lived assets on retirement must be disclosed for tax purposes. LOI is not going to carryout any renovations or removal, he has no obligation to disclose any of the costs since he is not going renovate or dispose the warehouses. The rule of retirement of tangible long term assets requires the business to recognize the retirement obligation on assets when the transfer takes place.
For LOI, the transfer will take place after five years. Therefore, this transfer will be recognized when the buyer pays for the assets. This is subject to earlier estimation of the fair value of the asset. LOI is only obliged to record the value of the asset at its fair value on the consensus price between LOI and the buyer: the market value (Stickney, Weil, and Schipper, 268).
LOI is neither planning to renovate nor dispose the warehouse; therefore, not bound to the law. Pickard in his book explains “the law requires that a notice is to be given in ten working calendar days before any demolition or disposal is to take place”. The single notice is forwarded to the Commonwealth Act office. LOI is therefore, not bound in this law. LOI will only be undertaking minor repairs to the warehouse for the coming years. The 13 warehouses will continue to exist as long as the maintenance is within the law regarding the handling of asbestos. The law only applies to the removal or renovation of materials containing asbestos products.
The warehouses have been operating for over 50 years and LOI may have been covering the cost sine their construction date since FASB allows for such arrangements. The FASB law allows a business to start recognizing its assets obligation from the start period or later at retirement. When the warehouse are still existing without removal, LOI has to employ an expert in handling asbestos but not other costs as required by the law. The assets are not retiring hence the obligation as required by the law for the disclosure associated with retirement is not valid. Statement 123 does not apply in this case since the assets lives are still indefinite (Eisen, 502).
Yes they have to be carried out since we notice in Hallenborg and Stewart they explain that; customer trust is a value for an enterprise. For LOI, the past experience with the customer indicates that the customer has never enforced the law of disposal of asbestos. LOI is therefore not obliged to follow the requirements of disposal and recognition of asset value. The reasons are; in FASB the law allows that revenues are only recognized when payment is received against it (62).
In McGraw-Hill Education, the obligation is recognized at its fair value in which it can trade in the market. The Office of the Federal Register (U.S.) reinstate in their notice, “In statement FASB No.123 that is applicable to all the tangible long lived assets”. It covers individual assets and or group assets. The rule is applicable to the legal obligations of a company or an individual for his acquisition, development, renovation or disposes of tangible long lived or capital asset. If there is no qualifying obligation in the acquisition of an asset, the law is clearly stated. In such a situation, the FASB allows the CPA’s to analyze the case at hand and provides guidance to the parties involved. The statement gives guidance as to the reasons why LOI stated for non recognition of cost of removal of asbestos retirement of assets (warehouses).
The intention by the LOI to dispose off the warehouse is just a mere plan and does not need any recognition in the face of the law. Until such actions are realized, the recognition is not mandatory. The law on the removal of asbestos that is an environmental liability is not breached. When disposing off assets as in the case of LOI in the coming years, the law is applicable. The costs are transferred to the new owner when he buys the warehouse in this arrangement.
The buyers past experience of not enforcing the law justifies the LOI stand of not recognizing the costs. The FASB law allows a business to start recognizing its assets obligation from the start period or later at retirement. LOI may have covered these entire obligations before this plan of disposing the warehouse to the new owner ( Miller, Redding and Bahnson ,98).
Eisen, Peter. Accounting: Barron’s Accounting. Chicago: Barron’s Educational Series, 2007.
Gerrard, Michael. Law of environmental justice: theories and procedures to address disproportionate risks. Chicago: American Bar Association, 2008.
Hallenborg, Mary, and Stewart Marcia. New York Landlord’s Law Book. New York: Mary Ann Hallenborg, 2003.
McGraw-Hill Education. FASB: Tatem Fin Accouting. New York: McGraw-Hill Education, 1992.
Miller, Paul, Redding, Rodney, and Bahnson Paul. The FASB: the people, the process and the politics. New York: Irwin/McGraw-Hill, 1998.
Office of the Federal Register (U.S.). Code of Federal Regulations, Title 29, Labor. New York: Government Printing Office, 2010.
Pickard, Martin. Facilities Management Legal Update 2008: Special Report. London: Workplace Law Group, 2008.
Reitze, Arnold. Air pollution control law: compliance and enforcement. New York: Environmental Law Institute, 2001.
Smith, Malcolm. Performance measurement & management: a strategic approach to management accounting. London: SAGE, 2005.
Stickney, Clyde, Weil, Roman, and Schipper Katherine. Financial Accounting: An Introduction to Concepts, Methods and Uses. London: Cengage Learning, 2009.