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CH1, Dismantling costs.

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › CH1, Dismantling costs.

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by P2-D2.
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  • April 9, 2021 at 4:46 am #616507
    7fsa
    • Topics: 56
    • Replies: 40
    • ☆☆

    Dear Chris

    How are you?
    I hope you are doing well
    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?

    April 10, 2021 at 8:52 am #616633
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6115
    • ☆☆☆☆☆

    Hi,

    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.

    Thanks.

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