59130 Federal Register / Vol. 69, No. 191 / Monday, October 4, 2004 / Rules and Regulations 

1Statement of Financial Accounting Standards 

No. 143 (Statement 143), Accounting for Asset 

Retirement Obligations, is effective for financial 

statements issued for fiscal years beginning after 

June 15, 2002.

2 If an obligation for expected asset retirement 

costs has not been accrued under Statement 143 for 

certain asset retirement costs required to be 

included in the full cost ceiling calculation under 

Rule 4–10(c)(4), such costs should continue to be 

included in the full cost ceiling calculation. 3This approach is consistent with the guidance 

in paragraph 12 of Statement 143 on testing for 

impairment under Statement of Financial 

Accounting Standards No. 144, Accounting for the 

Impairment or Disposal of Long-Lived Assets. 

Under that guidance, the asset tested should 

include capitalized asset retirement costs. The 

estimated cash flows related to the associated ARO 

that has been recognized in the financial statements 

are to be excluded from both the undiscounted cash 

flows used to test for recoverability and the 

discounted cash flows used to measure the asset’s 

fair value.

PART 71—DESIGNATION OF CLASS A, 

CLASS B, CLASS C, CLASS D, AND 

CLASS E AIRSPACE AREAS; 

AIRWAYS; ROUTES; AND REPORTING 

POINTS

■ 1. The authority citation for part 71 

continues to read as follows:

Authority: 49 U.S.C. 106(g), 40103, 40113, 

40120; E.O. 10854, 24 FR 9565, 3 CFR 1959–

1963 Comp., p. 389.

§ 71.1 [Amended]

■ 2. The incorporation by reference in 14 

CFR 71.1 of Federal Aviation 

Administration Order 7400.9M, dated 

August 30, 2004, and effective 

September 16, 2004, is amended as 

follows:

* * * * *

Paragraph 6005 Class E airspace areas 

extending upward from 700 feet or more 

above the surface of the earth.

* * * * *

ACE MO E5 Lamar, MO 

Lamar Municipal Airport, MO 

(Lat. 37°29′22′′ N., long. 94°18′41′′ W.) 

Spring River NDB 

(Lat. 37°29′13′′ N., long. 94°18′37′′ W.)

That airspace extending upward from 700 

feet above the surface within a 6.3-mile 

radius of Lamar Municipal Airport and 

within 2.5 miles each side of the 221° bearing 

from the Spring River NDB extending from 

the 6.3-mile radius of the airport to 7 miles 

southwest of the NDB.

* * * * *

Dated: Issued in Kansas City, MO on 

September 21, 2004. 

Elizabeth S. Wallis, 

Acting Manager, Air Traffic Division, Central 

Region.

[FR Doc. 04–22278 Filed 10–1–04; 8:45 am] 

BILLING CODE 4910–13–M

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Part 211 

[Release No. SAB 106] 

Staff Accounting Bulletin No. 106

AGENCY: Securities and Exchange 

Commission.

ACTION: Publication of staff accounting 

bulletin. 

SUMMARY: The interpretations in this 

staff accounting bulletin express the 

staff’s views regarding the application of 

FASB Statement No. 143, Accounting 

for Asset Retirement Obligations, by oil 

and gas producing companies following 

the full cost accounting method.

DATES: Effective September 28, 2004.

FOR FURTHER INFORMATION CONTACT:

Cathy J. Cole or John W. Albert, Office 

of the Chief Accountant (202) 942–4400 

or Leslie A. Overton, Division of 

Corporation Finance (202) 942–2960, 

Securities and Exchange Commission, 

450 Fifth Street, NW., Washington, DC 

20549–1103.

SUPPLEMENTARY INFORMATION: The 

statements in staff accounting bulletins 

are not rules or interpretations of the 

Commission, nor are they published as 

bearing the Commission’s official 

approval. They represent interpretations 

and practices followed by the Division 

of Corporation Finance and the Office of 

the Chief Accountant in administering 

the disclosure requirements of the 

Federal securities laws.

Dated: September 28, 2004. 

Margaret H. McFarland, 

Deputy Secretary.

PART 211—[AMENDED]

■ Accordingly, part 211 of title 17 of the 

Code of Federal Regulations is amended 

by adding Staff Accounting Bulletin No. 

106 to the table found in subpart B.

Note: The text of SAB 106 will not appear 

in the Code of Federal Regulations.

Staff Accounting Bulletin No. 106 

The staff hereby adds Section 4 to 

Topic 12–D of the staff accounting 

bulletin series. Topic 12–D.4 provides 

guidance regarding the interaction of 

Statement of Financial Accounting 

Standards No. 143, Accounting for Asset 

Retirement Obligations, with the full 

cost accounting rules in Article 4–10 of 

Regulation S–X.

Topic 12: Oil and Gas Producing 

Activities

* * * * *

D. Application of Full Cost Method of 

Accounting

* * * * *

4. Interaction of Statement 143 1 and the 

Full Cost Rules

a. Impact of Statement 143 on the Full 

Cost Ceiling Test 

Facts: A company following the full 

cost method of accounting under Rule 

4–10(c) of Regulation S–X must 

periodically calculate a limitation on 

capitalized costs, i.e., the full cost 

ceiling. Prior to adopting Statement 143, 

in calculating the full cost ceiling a 

company reduced the expected future 

revenues from proved oil and gas 

reserves by the estimated future 

expenditures to be incurred in 

developing and producing such reserves 

discounted using a factor specified in 

the rule. While expected future cash 

flows related to the asset retirement 

obligation (ARO) were included in the 

calculation of the ceiling test, no 

associated asset was recorded. Under 

Statement 143, a company must 

recognize a liability for an asset 

retirement obligation at fair value in the 

period in which the obligation is 

incurred, if a reasonable estimate of fair 

value can be made. The company also 

must initially capitalize the associated 

asset retirement costs by increasing 

long-lived oil and gas assets by the same 

amount as the liability. Any asset 

retirement costs capitalized pursuant to 

Statement 143 are subject to the full cost 

ceiling limitation under Rule 4–10(c)(4) 

of Regulation S–X. If after adoption of 

Statement 143, a company were to 

continue calculating the full cost ceiling 

by reducing expected future net 

revenues by the cash flows required to 

settle the ARO, then the effect would be 

to ‘‘double-count’’ such costs in the 

ceiling test. The assets that must be 

recovered would be increased while the 

future net revenues available to recover 

the assets continue to be reduced by the 

amount of the ARO settlement cash 

flows. 

Question 1: After adopting Statement 

143, how should a company compute 

the full cost ceiling to avoid doublecounting the expected future cash 

outflows associated with asset 

retirement costs? 

Interpretive Response: After adoption 

of Statement 143, the future cash 

outflows associated with settling AROs 

that have been accrued on the balance 

sheet should be excluded from the 

computation of the present value of 

estimated future net revenues for 

purposes of the full cost ceiling 

calculation.2 3

Question 2: What disclosures should 

the company provide on the interaction 

of Statement 143 and the full cost rules? 

Interpretive Response: In order to 

inform financial statement users on the 

interaction of Statement 143 and the full 

cost rules, a company following such 

rules is expected to provide appropriate 

disclosures in the financial statement 

footnotes and Management’s Discussion 

and Analysis explaining in detail how

Federal Register / Vol. 69, No. 191 / Monday, October 4, 2004 / Rules and Regulations 59131

4The reference to ‘‘cost of properties described in 

paragraph (ii) below’’ relates to the costs of 

investments in unproved properties and major 

development projects, as defined.

the adoption of Statement 143 impacts 

its accounting for oil and gas operations. 

This disclosure is expected to address 

each area of accounting that is impacted 

or expected to be impacted and should 

specifically address each way that the 

company’s application of full cost 

accounting has changed as a result of 

adoption of Statement 143. These 

disclosures and discussions should 

include, but are not limited to, how the 

company’s calculation of the ceiling test 

and depreciation, depletion, and 

amortization are affected by the 

adoption of Statement 143. 

b. Impact of Statement 143 on the 

Calculation of Depreciation, Depletion, 

and Amortization 

Facts: Regarding the base for 

depreciation, depletion, and 

amortization (DD&A) of proved reserves, 

Rule 4–10(c)(3)(i) of Regulations S–X 

states that ‘‘[c]osts to be amortized shall 

include (A) all capitalized costs, less 

accumulated amortization, other than 

the cost of properties described in 

paragraph (ii) below; 4 (B) the estimated 

future expenditures (based on current 

costs) to be incurred in developing 

proved reserves; and (C) estimated 

dismantlement and abandonment costs, 

net of estimated salvage values.’’

Statement 143 requires that upon initial 

recognition of an ARO, the associated 

asset retirement costs be included in the 

capitalized costs of the company. 

Therefore, subsequent to the adoption of 

Statement 143, the estimated 

dismantlement and abandonment costs 

described in (C) above may be included 

in the capitalized costs described in (A) 

above, at least to the extent that an ARO 

has been incurred as a result of 

acquisition, exploration and 

development activities to date. Future 

development activities on proved 

reserves may result in additional asset 

retirement obligations when such 

activities are performed and the 

associated asset retirement costs will be 

capitalized at that time.

Question: Following the adoption of 

Statement 143, should the costs to be 

amortized under Rule 4–10(c)(3) of 

Regulation S–X include an amount for 

estimated dismantlement and 

abandonment costs, net of estimated 

salvage values, that are expected to 

result from future development 

activities? 

Interpretive Response: Yes. To the 

extent that estimated dismantlement 

and abandonment costs, net of 

estimated salvage values, have not been 

included as capitalized costs in the base 

for computing DD&A because they have 

not yet been capitalized as asset 

retirement costs under Statement 143, 

compliance with Rule 4–10(c)(3) of 

Regulation S–X continues to require that 

they be included in the base for 

computing DD&A. Companies should 

estimate the amount of dismantlement 

and abandonment costs that will be 

incurred as a result of future 

development activities on proved 

reserves and include those amounts in 

the costs to be amortized. 

c. Transition 

Question: When will registrants be 

expected to comply with the accounting 

and disclosures described in this 

bulletin? 

Interpretive Response: All registrants 

are expected to apply the accounting 

and disclosures described in this 

bulletin prospectively as of the 

beginning of the first fiscal quarter 

beginning after the publication of this 

bulletin in the Federal Register. If a 

registrant files financial statements with 

the Commission before applying the 

guidance in this bulletin, disclosures 

similar to those described in Staff 

Accounting Bulletin Topic 11–M should 

be provided.

[FR Doc. 04–22186 Filed 10–1–04; 8:45 am] 

BILLING CODE 8010–01–P

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES

Food and Drug Administration

21 CFR Part 520

Oral Dosage Form New Animal Drugs; 

Ivermectin Paste

AGENCY: Food and Drug Administration, 

HHS.

ACTION: Final rule.

SUMMARY: The Food and Drug 

Administration (FDA) is amending the 

animal drug regulations to reflect 

approval of a supplemental new animal 

drug application (NADA) filed by Merial 

Ltd. The supplemental NADA provides 

revised labeling for ivermectin oral 

paste used in horses.

DATES: This rule is effective October 4, 

2004.

FOR FURTHER INFORMATION CONTACT:

Martine Hartogensis, Center for 

Veterinary Medicine (HFV–216), Food 

and Drug Administration, 7519 Standish 

Pl., Rockville, MD 20855, 301–827–

7815, e-mail: 

martine.hartogensis@fda.gov.

SUPPLEMENTARY INFORMATION: Merial 

Ltd., 3239 Satellite Blvd., Bldg. 500, 

Duluth, GA 30096–4640, filed a 

supplement to NADA 134–314 for 

EQVALAN (ivermectin 1.87 percent) 

Paste for Horses. The supplemental 

application provides for revisions to the 

labeled indications. Specifically, under 

the sub-heading ‘‘Small Strongyles,’’ the 

labeling has been revised to separate the 

listing of adult species from the fourthstage larvae. The supplemental NADA is 

approved as of August 9, 2004, and 21 

CFR 520.1192 is amended to reflect the 

approval. The basis of approval is 

discussed in the freedom of information 

summary.

In accordance with the freedom of 

information provisions of 21 CFR part 

20 and 21 CFR 514.11(e)(2)(ii), a 

summary of safety and effectiveness 

data and information submitted to 

support approval of this application 

may be seen in the Division of Dockets 

Management (HFA–305), Food and Drug 

Administration, 5630 Fishers Lane, rm. 

1061, Rockville, MD 20852, between 9 

a.m. and 4 p.m., Monday through 

Friday.

The agency has determined under 21 

CFR 25.33(d)(1) that this action is of a 

type that does not individually or 

cumulatively have a significant effect on 

the human environment. Therefore, 

neither an environmental assessment 

nor an environmental impact statement 

is required.

This rule does not meet the definition 

of ‘‘rule’’ in 5 U.S.C. 804(3)(A) because 

it is a rule of ‘‘particular applicability.’’

Therefore, it is not subject to the 

congressional review requirements in 5 

U.S.C. 801–808.

List of Subjects in 21 CFR Part 520

Animal drugs.

■ Therefore, under the Federal Food, 

Drug, and Cosmetic Act and under 

authority delegated to the Commissioner 

of Food and Drugs and redelegated to the 

Center for Veterinary Medicine, 21 CFR 

part 520 is amended as follows:

PART 520—ORAL DOSAGE FORM 

NEW ANIMAL DRUGS

■ 1. The authority citation for 21 CFR 

part 520 continues to read as follows:

Authority: 21 U.S.C. 360b.

■ 2. Section 520.1192 is amended by 

revising paragraph (e)(1) to read as 

follows: