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It’s mentioned on Kaplan textbook that dismantling costs – the present value of these costs should be capitalized, with an equivalent liability set up.
the discount on this liability would then be unwonded over the period until the dismantling costs are paid.
1-Could you explain what does an equivalent liability set up?
2-could you explain the last paragraph which related to the discount etc…. over numerical example, please?
1 – DR PPE CR Provision (equivalent liability)
2 – DR Finance cost CR Provision each year and the amount is the change in the value of the provision, i.e. 5% (say) of the opening provision.