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Why do we consider the future expenditure related to environmental costs as an asset (Dr Asset and Cr Provision) and why not as an expense (Dr Expense Cr Provision)?
Thanks
It’s not an expense related to the year! But, by making the annual adjustments for unrolling discounted estimate, and by accounting as an expense any changes resulting from changes in estimates, these changes are expensed in their respective years because they relate to this year.
By capitalising the projected expense discounted to present value, that increased asset value causes an increase in the annual depreciation expense so, in effect, the pv of the future cost of site restoration IS being expensed through the increased annual depreciation charge
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