When the Gold is Gone: Reporting of Asset Retirement Obligations for the Ultimate Cleanup of Closed Mining Operations

ABSTRACT: Hardrock mining companies contribute positively to the U.S. economy. However, they also cause serious degradation to the surrounding environment. According to the Environmental Protection Agency, hardrock mining companies are among the greatest polluters in the United States. Mining companies are responsible for satisfying legal obligations arising under environmental laws that include cleanup and exit costs for all mines shut down. These environmental liabilities are called asset retirement obligations and under FAS No. 143, U.S. mining operators are required to recognize their asset retirement obligations upon acquisition or construction of their mines. In this paper, we examine the financial reporting for asset retirement obligations for gold mining companies. Based on a simple ratio analysis, it appears that top U.S. gold mining operators have sufficient financial resources to meet their future asset retirement obligations. However, when we conducted sensitivity analysis to exclude intangibl...