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what happen to the ‘ask acca lectures’ feature?why isnt it there anymore?i have something to ask abut p2 dismantlement cost.i want to know why do we capitalise dismantlement cost?why isnt it a liability because its something we pay in the future,.and why do we unwind those finance cost?thanks!!
We DO reflect it as a liability! The entry to capitalise is Dr Asset Account and Cr Obligation Account (Provision Account) with the discounted present value of the decommissioning costs
Then, as each year goes by, the decommissioning activity becomes one year closer so that discounted original estimate of decommissioning needs to be unwound. In addition, it is highly probable that the estimate of the cost of decommissioning will also have changed since last year.
We therefore have TWO finance charges involved:- a) the unwinding of the provision brought forward and b) any aount representing the revision of the ultimate costs of decommissioning
Is that clear? If not, post again on P2 Ask the tutor
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