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Subject Topic: Governmental-solid waste landfill (Topic Closed Topic Closed) Post ReplyPost New Topic
  
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sanju06
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Posted: 09 May 2009 at 12:07 | IP Logged  

Purchase of equipment included in the current cost of closure and post closure care activities is not to be reported as asset. It is a reduction in liability .(CPA-01024)
Can someone explain this with a journal entry and if possible the concept behind this?
Thanks
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CPA-hopeful
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Posted: 09 May 2009 at 13:10 | IP Logged  

If you post the question others might be able to help.  I don't have Becker.

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divyagovil1
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Posted: 11 May 2009 at 11:24 | IP Logged  

Not sure about the JEs....

The concept is to follow some environment protection rules for operating MSWLF.

Summary :-

v     An EPA rule requires all municipal

            landfills to meet stringent location, design, and operating requirements

v     Operators must also provide financial assurance they can properly close landfills when full and provide post-closure ground water monitoring for 30 years after closure

v     These stringent rules are designed to protect the environment from irresponsible handling of hazardous materials

 

Recognition requirements :-

v     Estimate the current cost of hiring a qualified third-party to close the MSWLF and care for it for 30 years after closure

v     Recognize a portion of this cost proportionate to the ratio of estimated capacity utilized during a year over the total capacity of the landfill as an expense of the enterprise fund and as a liability

v    Annual adjustments are made as estimates change from year to year. 

Here is the link for more info :-

http://www.gasb.org/st/summary/gstsm18.html

 



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Jerry
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Posted: 11 May 2009 at 17:20 | IP Logged  

sanju06 wrote:
Purchase of equipment included in the current cost of closure and post closure care activities is not to be reported as asset. It is a reduction in liability .(CPA-01024)
Can someone explain this with a journal entry and if possible the concept behind this?
Thanks

A landfill gemerally comes under the jurisdiction of Enterprise Funds.  Proprietary funds use the accrual basis of accounting.  This means that the matching principle comes into play for the landfill.

This is the problem:  Income comes in the first years of the landfill.  Expenses, such as equipment to monitor methane gas, may come 25 or 30 years later. Therefore, the cost of the equipment is amortized over the useful life of the landfill.  Current expenses would include a portion of expected disbursements in future years.

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