FASB proposing new standard for long-term assets

Merrill says that investors should be aware that the accounting commentary services will use the proposed new standards to judge current procedures and there is the possibility of. negative publicity and market reaction to those that are out of line with the FASB.

It warns investors to be wary of firms that do not recognize obligations or part of the obligation associated with the retirement of long-term assets, or only the obligation at retirement. Merrill also says beware of firms that underestimate long-lived asset retirement costs, and those that increase periodic depreciation costs and the long-lived asset’s depreciable base by the estimated retirement obligation.

The new standard won’t take effect until June 15, 2001, but Merrill suggests that investors keep the new standard in mind because commentary firms will press the it into service immediately.

Merrill says that investors should be pleased with the prospect of a new standard. “The current financial reporting practices are inconsistent and, in some cases, misleading.”