Question

1. The accrual of restructuring costs creates obligations (liabilities) referred to as exit or disposal cost obligations? Please answer in detail.

a. obtain the relevant authoritative literature on exit or disposal cost obligation using the FASB's Codification Research System. You might gain access to the FASB website. What is the codification topic number that addresses this issue?

b. What is the specific citation that addresses the initial measurement of these obligations?

c. How are these obligations and related costs to be measured?

d. What is the specific citation that describes the disclosure requirements in the notes to the financial statements for exit or disposal obligations?

e. List the required disclosures.

Answer 1

a. The FASB accounting standard codification number that addresses exit or disposal cost obligations is FASB ASC 420 : "Exit or Disposal Cost Obligations"

b. The specific citation that address the initial measurement of these obligations is FASB ASC 420-10-30-1: “Exit or Disposal Cost Obligations – Overall – Initial Measurement.”

c. As per FASB ASC 420 : "Exit or Disposal Cost Obligations", A liability that is incurred for a cost associated with an exit or disposal activity shall be measured initially at its fair value in the period in which the liability is incurred.

d. The specific citation that describes the disclosure requirements in the notes to the financial statements for exit or disposal obligations is FASB ASC 420-10-50-1: “Exit or Disposal Cost Obligations – Overall – Disclosure.”

e. All of the following information shall be disclosed in notes to financial statements that include the period in which an exit or disposal activity is initiated and any subsequent period until the activity is completed:

a. A description of the exit or disposal activity, including the facts and circumstances leading to the expected activity and the expected completion date

b. For each major type of cost associated with the activity (for example, one-time employee termination benefits, contract termination costs, and other associated costs), both of the following shall be disclosed:

1. The total amount expected to be incurred in connection with the activity, the amount incurred in the period, and the cumulative amount incurred to date

2. A reconciliation of the beginning and ending liability balances showing separately the changes during the period attributable to costs incurred and charged to expense, costs paid or otherwise settled, and any adjustments to the liability with an explanation of the reason(s) why.

c. The line item(s) in the income statement or the statement of activities in which the costs in (b) are aggregated

d. For each reportable segment, as defined in Subtopic 280-10, the total amount of costs expected to be incurred in connection with the activity, the amount incurred in the period, and the cumulative amount incurred to date, net of any adjustments to the liability with an explanation of the reason(s) why

e. If a liability for a cost associated with the activity is not recognized because fair value cannot be reasonably estimated, that fact and the reasons why.