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Question:Nette
In the calculation of decommissioning cost where it s comprises 80% cost relate to removal and 20% relate to rectification of. damage caused through the extraction of natural gas.(oil extraction has commenced a year ago)
(Accounting treatment) in this case either the cost relate to rectification related to the extraction of gas would be included in the capitalise or not?
In the book solution it s not capitalised..No, because it is production related. So, if no gas is produced for the next 19 years, that 20% will not be paid. But we would still face the decommissioning costs
Does that help?
ok got it.but hw wd i kw gas wd be produced or not.Do we always take same assumtion when it is about cost related to production.
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