Decommissioning Provision

Question 1

IFRS vs ASPE

Answer 1

Decommissioning provision
vs
Asset retirement obligation

Question 2

Criteria to record liability on bs

Answer 2

• The entity has a present obligation as a result of a past event
• It is probably that an outflow of economic resources will be required to settle the obligation
• A reliable estimate can be made (rarely no estimate)

Question 3

Initial measurement

Answer 3

At best estimate
Do PV of best estimate. Pre tax
Discount rate = current market risk

DR Capital Asset
CR Decommissioning provision

Question 4

Subsequent measurement

Answer 4

Liability: Update if best estimate changes.
Update to current PV.
DR Interest expense
CR Decommissioning provision

Capital Asset: Depreciate over useful life.
PV of decommission / useful life.
Should be nil by end of term.

Question 5

ASPE differences

Answer 5

Must have a legal obligation to be recorded

Accretion expense rather than interest