Financial Disclosure of Asset Retirement Obligations
IT IS THEREFORE RESOLVED THAT Alberta Municipalities advocate to the Government of Alberta for financial support and tools to support municipalities to comply with PS 3280 in the most cost-efficient manner possible.
WHEREAS the addition of accounting standard PS 3280, Asset Retirement Obligations (ARO), increases the transparency of a municipality’s environmental liabilities through a municipality’s audited financial statements;
WHEREAS the new ARO accounting standard requires municipalities and regional service commissions to report the estimated cost to retire, decommission, remediate, or monitor specific tangible capital assets that present an environmental liability at the end of its useful life;
WHEREAS many municipalities, particularly smaller municipalities, lack the administrative capacity to efficiently and accurately assess the estimated cost to retire their relevant tangible capital assets when those assets are deemed to no longer be needed to serve the community; and
WHEREAS municipalities facing the need for abatement assessments lack adequate financial support to comply with these requirements.
BACKGROUND:
In 2018, the Public Sector Accounting Board (PSAB) approved standard PS 3280, Asset Retirement Obligations, with it coming into force for all municipal financial statements for the year ending in 2023. With the implementation of PS 3280, public sector bodies, including municipalities, need to report in their financial statements the estimated cost to retire, decommission, remediate, or monitor specific tangible capital assets once they reach their end of life. Common examples include:
- Buildings with asbestos
- Closure of landfills
- Closure of wastewater treatment facilities
The issuance of detailed guidelines by the province for this process, along with the consideration of best practices to protect municipalities from lawsuits and legal costs associated with such disclosures, would be advantageous.
Some municipalities might struggle to effectively evaluate their environmental liability, which would require hiring consultants to do the work for them. This is a cost that many smaller municipalities cannot afford.
Support from the Government of Alberta would significantly contribute to the stability and sustainability of municipalities across Alberta, enabling them to fulfill their responsibilities under the MGA while protecting them from undue financial and legal risks associated with the capital assets that carry an environmental or health risk.
ABmunis does not currently have a position on this issue. If this resolution is passed, it would be forwarded to the Government of Alberta for response and further advocacy would be recommended to ABmunis’ Board by the Municipal Governance Committee within the context of other priorities.