with the retirement of tangible long-lived assets and the associated asset retirement costs. Statement 143 provides for recognition of a liability for a legal obligation associated with the retirement of a long-lived asset that results from the acquisition, construction, development, and (or) the normal operation of a long-lived asset. The initial recognition of a liability for an asset retirement obligation increases the carrying amount of the related long-lived asset by the same amount as the liability. In periods subsequent to initial measurement, period-to-period changes in the liability are recognized for the passage of time (accretion) and revisions to the original estimate of the liability. Additionally, the capitalized asset retirement cost is subsequently allocated to expense using a systematic and rational method over its useful life. 2. Statement 95 requires cash receipts and payments in a statement of cash flows to be classified as operating, investing, or financing activities. Statements 143 and 95 do not provide specific guidance on the classification of the cash outflows incurred upon settlement of the liability for the asset retirement obligation within an enterprise's statement of cash flows. Because asset retirement costs have aspects of more than one Copyright © 2002, Financial Accounting Standards Board Not for redistribution Page 1class of cash flows, questions have arisen about the proper classification of such cash outflows. 3. The issue is how the cash paid upon settlement of an asset retirement obligation should be classified in an enterprise's statement of cash flows. EITF DISCUSSION 4. The Task Force reached a consensus that a cash payment made to settle an asset retirement obligation should be classified in the statement of cash flows as an operating activity
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