When certain kinds of assets are built that require public welfare and safety expenditures at the end of the asset's life,

A) these estimated future expenditures are subtracted from the carrying value of the asset.
B) these "asset retirement" costs are expensed when asset retirement occurs.
C) this fact is only reported in the notes to the financial statements.
D) a liability simultaneously arises.

When certain assets are built that require public welfare and safety expenditures at the end of the asset's life, a liability simultaneously arises. This liability is estimated based on the costs that will be incurred to retire the asset and remediate any damage caused by the asset. This liability needs to be recognized in the financial statements to provide a complete picture of the entity's financial position.