NOTE 17: ASSET RETIREMENT OBLIGATIONS

Asset retirement obligations (AROs) are legal obligations associated with the retirement of long-lived assets resulting from the acquisition, construction, development and/or normal use of the underlying assets.

Recognition of a liability for an ARO is required in the period in which it is incurred at its estimated fair value. The associated asset retirement costs are capitalized as part of the carrying amount of the underlying asset and depreciated over the estimated useful life of the asset. The liability is accreted through charges to operating expenses. If the ARO is settled for other than the carrying amount of the liability, we recognize a gain or loss on settlement.

We record all AROs for which we have legal obligations for land reclamation at estimated fair value. Essentially all these AROs relate to our underlying land parcels, including both owned properties and mineral leases. For the years ended December 31, we recognized ARO operating costs related to accretion of the liabilities and depreciation of the assets as follows:



in thousands	2013	2012	2011
ARO Operating Costs
Accretion	$ 10,685	$ 7,956	$ 8,195
Depreciation	3,527	5,599	7,242
Total	$ 14,212	$ 13,555	$ 15,437

ARO operating costs are reported in cost of goods sold. AROs are reported within other noncurrent liabilities in our accompanying Consolidated Balance Sheets.

Reconciliations of the carrying amounts of our AROs for the years ended December 31 are as follows:



in thousands	2013	2012
Asset Retirement Obligations
Balance at beginning of year	$ 150,072	$ 153,979
Liabilities incurred	69,111	127
Liabilities settled	(16,203)	(2,993)
Accretion expense	10,685	7,956
Revisions up (down), net	14,569	(8,997)
Balance at end of year	$ 228,234	$ 150,072

The ARO liabilities incurred during 2013 relate primarily to reclamation activities required under a new development agreement and a conditional use permit at an aggregates facility on owned property in Southern California. The reclamation requirements at this property will result in the restoration and development of mined property into a 90 acre tract suitable for commercial and retail development. Upward revisions to our ARO liability during 2013 are largely attributable to an adjacent aggregates facility on owned property. The estimated cost to fill and compact the property increased and the estimated settlement date decreased resulting in an upward revision to the ARO.

Downward revisions to our ARO liability during 2012 relate primarily to extensions in the estimated settlement dates at numerous sites.