Dismantling, removal and restoration costs

Learning objectives

• Identify when a decommissioning obligation must be included in the cost of the asset.L3
• Calculate the discounted decommissioning amount included in the initial cost from a given estimate and discount rate.L3
• Record the initial recognition of the asset and the decommissioning provision.L3
• Analyse the interaction between IAS 16, IAS 37 and IFRIC 1 in a decommissioning file.L4

Normative references

• IAS 16 §16Elements of cost: purchase price (import duties and non-refundable purchase taxes, after trade discounts and rebates); costs directly attributable to bringing the asset to the location and condition needed for it to operate as management intends; the initial estimate of the costs of dismantling and removing the item and restoring the site, when the obligation arises on acquiring the item or from using it during a period for purposes other than producing inventories.
• IAS 16 §18IAS 2 applies to decommissioning obligations incurred during a period as a consequence of having used the item to produce inventories; obligations accounted for under IAS 2 or IAS 16 are recognised and measured in accordance with IAS 37.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

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