IFRS: Decommissioning provisions and costs

Question 1

DECOMMISSIONING
PROVISIONS AND COSTS - recognition

Answer 1

Recognize obligation when all the following are satisfied:
* *Present obligation *(legal or constructive) arising from past event.
* Probable outflow to settle obligation.
* Reliable estimate can be made.

Recognize asset at the same time as obligation is recorded.

IAS 37.14

Question 2

DECOMMISSIONING
PROVISIONS AND COSTS - initial measurement

Answer 2

Initial measurement:
* Measure at the best estimate of expected amount to be required to settle.
* Present value at pre-tax rate that reflects market risk.
* Entry is to DR Asset and CR Decommissioning provision.*

Question 3

DECOMMISSIONING
PROVISIONS AND COSTS - subsequent measurement

Answer 3

Subsequent measurement:
Liability**:
— Update the provision for changes in the amount and timing of future payments
and changes in discount rate. These changes impact the provision and the
statement of comprehensive income.
— Adjust for time value of money — recognized as interest expense.
**Asset:
— Depreciate the asset.

Question 4

ASPE differences - IFRS (IAS 37)

Answer 4

Legal and constructive obligations;
recognizes the recording of the change in
the provision as an interest expense (or
finance cost) for passage of time