Set 5 FR 11 Decommissioning Provisions

Question 1

3 criteria for recognizing decomissioning provision?

Answer 1

• present obligation (legal or constructive for IFRS) arising from past event
• probably outflow to settle obligation
• reliable estimate can be made

Question 2

initial measurement - how is it done? what is the JE?

Answer 2

• best estimate
• PV at PRE-tax rate that reflects market risk
• DR Asset and CR Decommissioning Provision

Question 3

subseq measurement

Answer 3

DR int expense, CR decommisioning provision (diff between original PV and updated PV)
DR dep expense, CR acc dep (original PV/life of asset)

if assumptions change, then asset and liability should be adjusted

Question 4

ASPE differences

Answer 4

only legal obligations allowed, not constructive

no interest expense - instead called accretion expense and is an operating expense