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In accordance with ias 16 initial estimates of dismantling and removing cost can be capitalised for an asset but in case of replacing the asset, are those costs considered as removing and dismantling cost for the old assets or as site preparation cost for the new asset?
The estimation of dismantling and removal costs are capitalised at the start of the life of the asset that is to be dismantled
Those capitalised estimated costs are then written off over the life of that asset by way of annual depreciation
The site preparation costs for any new (or replacement) asset are capitalised together with the cost of that asset AND its estimated dismantling costs and removal costs
Is that any clearer?
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