How will PS 3280, Asset Retirement Obligations change existing liabilities related to landfill closure costs?
Historically, municipalities in Canada have applied PS 3270, Solid Waste Landfill Closure and Post-Closure Liability for guidance on how to accrue obligations related to landfills. However, once PS 3280 Asset Retirement Obligations comes into effect, public sector entities can no longer apply the rules and methods in the old PS 3270 standard.
PSAB's old standard on landfill closure liabilities let municipalities accrue an obligation over time, as the capacity of a landfill diminished. So when 90% of landfill capacity still remained, only 10% of the liability would be accrued.
Under PSAB's new ARO standard, an accrual of an obligation over time is not permitted. The full value of the future liability must be recorded. The liability may be discounted back to its present value using an appropriate discount rate.