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Dear Sir,
Good day! Is dismantling cost increased each year classified as a current or non-current liability?
Thank you in advance!
Hi,
The cost to dismantle is recognised as a provision at present value, where an obligation exists. The discounted cost it added to the cost of the PPE, held within non-current assets.
The dismantling cost provision will be held within non-current liabilities and unwound to its terminal/final value using the discount rate applied. The adjustment increases the provision with the other side recognised through profit or loss as a finance cost.
Thanks
We reclassify a certain portion of this provision each year by multiplying the interest rate and PV of costs. Shouldn’t this increase in provision be classified as current liability and the remaining amount as non-current liability?
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