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	2017	2016	2015
ARO Operating Costs
Accretion	$ 11,415	$ 11,059	$ 11,474
Depreciation	6,302	6,353	6,515
Total	$ 17,717	$ 17,412	$ 17,989

ARO operating costs are reported in cost of revenues. 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	2017	2016
Asset Retirement Obligations
Balance at beginning of year	$ 223,872	$ 226,594
Liabilities incurred	1,920	505
Liabilities settled	(21,477)	(17,114)
Accretion expense	11,415	11,059
Revisions, net	2,387	2,828
Balance at end of year	$ 218,117	$ 223,872

ARO liabilities settled during 2017 and 2016 include $11,578,000 and $12,602,000, respectively, of reclamation activities required under a development agreement and conditional use permits at two adjacent aggregates sites on owned property in Southern California. The reclamation required under the development agreement will result in the restoration of 90 acres of previously mined property to conditions suitable for commercial and retail development.