Decommissioning Provisions

Question 1

Decommissioning Provision

Answer 1

obligation for an expected future cost to decommission a tangible asset

Question 2

Accretion

Answer 2

systematic increase of the obligation over time

Question 3

When to Recognize

Answer 3

present obligation (legal or constructive) arising from past event

probable outflow to settle obligation

reliable estimate can be made

Question 4

initial measurement

Answer 4

measured at the best estimate expected to be required to settle

present value at pre-tax rate that reflects market risk

JE:
Dr Asset
Dr Decommissioning Provision

Question 5

IFRS (IAS 36)

Answer 5

legal AND constructive obligations; recognizes accretion as an interest expense for passage of time

Question 6

ASPE (3063)

Answer 6

legal obligations ONLY

recognizes accretion as an operating expense for passage of time

Question 7

Present Obligation

Answer 7

considered to be met when an obligation event occurs

Question 8

Measurement of Liability

Answer 8

updated to the current best estimate

if the most appropriate discount rate has changed and/or the timing of the payment has changed, then that rate and timing should be used to calculate the present value of the obligation at the current date

an adjustment to the decommissioning provision and the related asset account