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.