This is from Eni SpA (ticker: E) 10-K
"No significant legal obligations to retire refining, transportation, marketing (downstream) and chemical long-lived assets generally were recognized, as indeterminate settlement dates for the asset retirements prevented estimation of the fair value of the associated asset retirement obligation.
The primary impact of SFAS 143 is to change the method of accxruing for upstream site restoration costs."
If it says that there were no legal obligations etc., why is there still an impact? How are upstream site restoration costs different?
2007-03-27 11:19:49 · 4 answers · asked by ben_ev0lent 1 in Business & Finance ➔ Other - Business & Finance
Huh?
2007-03-27 11:23:07 · answer #1 · answered by Kel Kel 3 · 0⤊ 0⤋
From my interpretation of the statement, the upstream site(s) (aka the oil/gas field) have a settlement date for asset retirement that could be determined, and Eni is accruing costs for it. This make sense from the perspective that once the oil field is produced out it will be shut-down. We know how much oil the field contains and can make a reasonable projection on its lifespan. But the downstream pipelines and refining/chemical assets will continue to produce long after the oil field as long as there are other oil fields that can supply feedstock. These future oil fields don't even have to be Eni oil fields. Hence the settlement date for asset retirement of the downstream assets are indeterminate.
2007-03-27 11:27:13 · answer #2 · answered by gls_merch 5 · 0⤊ 0⤋
This is all accounting crap. First of all, SFAS 143 requires a company to record a liability when they know they will have to retire an asset. This is most common in an industry with environmental problems (asbestos, underground fuel storage tanks, polution control, etc.) The problem with SFAS 143 is it allowed for companies to say that the retirement date was contingent and therefore the liability could not be determined. However, the FASB corrected this gap by issuing FIN 47 to eliminate the contingent exception. It sounds to me like this company has a liability, they probably have a good idea of the amount, but they are trying to avoid recording it.
2007-03-27 11:30:00 · answer #3 · answered by Homeslice 4 · 0⤊ 0⤋
i prefer answering questions that are in english
2007-03-27 11:24:23 · answer #4 · answered by Lost in Austen 3 · 0⤊ 1⤋