If a company incurs disposition obligations as a result of acquiring an asset:
A)The company recognizes the obligation at fair value when the asset is acquired.
B)The company recognizes the obligation at fair value when the asset is disposed.
C)The company records the difference between the fair value of the asset and the obligation when the asset is acquired.
D)None of these.

Question

Quizplus · Accepted Answer

The company should recognize the obligation at fair value when the asset is acquired as per ASC 450-30-25-1. The fair value of the obligation should be recorded as a liability and the corresponding amount should be added to the cost of the asset.

If a Company Incurs Disposition Obligations as a Result of Acquiring