This is a phrase one would use to proclaim that someone's posterior can produce one of 3 things, A. a loud and boisterous fart, B. a long winded and detailed fart, or C. a fart that produces a particularly foul odor when leaving someone's shitter. Almost always used after someone farts, and it is not courteous to proclaim that someone's ass, can indeed, fart, outside of a scenario in which said person previously farted in the last 15 seconds. You may also add 'though' to the end of the phrase if it suits your fancy.
*Someone in close vicinity starts ripping some serious ass.* "That ass can fart!" or "That ass can fart though!"