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This excerpt taken from the VLG 10-K filed Sep 28, 2006. Asset
Retirement Obligations
Effective June 30, 2006, the Company adopted FIN 47,
“Accounting for Conditional Asset Retirement
Obligations.” Under this standard, the Company recognized
additional liabilities, at fair value, of approximately $954,000
for asset retirement obligations (AROs), consisting primarily of
costs associated with cylinder and bulk tank disposal and
asbestos removal. These costs reflect the legal obligations
associated with the normal operation of the Company.
Additionally, the Company capitalized asset retirement costs by
increasing the carrying amount of related long-lived assets,
primarily machinery and equipment, and recorded associated
accumulated depreciation from the time the original assets were
placed into service. At June 30, 2006, the Company
increased the following: net properties, plants, and equipment
by $449,000, net deferred tax assets by $202,000 and liabilities
by $954,000.
The cumulative effect adjustment recognized upon adoption of
this standard was $303,000, consisting primarily of costs to
establish assets and liabilities related to cylinder and bulk
tank disposal and asbestos removal. Net income for the full
years of 2005 and 2004 would not have been materially different
if this standard had been adopted effective July 1, 2003.
The changes in the carrying amount of AROs for the year ended
June 30, 2006 and 2005 on a pro forma basis, as if this
standard had been adopted effective July 1, 2004, follow.
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