Ias16

[MarkerCama]

Situation: The facility has a useful life of 25 years. At the end of that time particular law requires that the site where the project is taking place should be decommissioned. This will require the company spending an estimated £250,000 for this partical asset.
Question: How do i need recorder this amount in statement of the financial possition and comprehencive income ? Should this cost be added to the cost of the asset or just recorded as a provision?

 

[bklynboy]

This sounds like either an asset retirement or environmental obligation and should be a liability on your books. I think you are in Britian but US GAAP guidance can be found in ASC 410. Review and see if this applies in your case

ASC 410 — Asset Retirement and Environmental Obligations

 

[Fidget]

Situation: The facility has a useful life of 25 years. At the end of that time particular law requires that the site where the project is taking place should be decommissioned. This will require the company spending an estimated £250,000 for this partical asset.
Question: How do i need recorder this amount in statement of the financial possition and comprehencive income ? Should this cost be added to the cost of the asset or just recorded as a provision?

under IAS 16 (and 37), you do both. The decommissioning cost is included as part of the cost of the asset, and a provision is created for the decommissioning cost as well.

The decommisioning cost is written off to the P&L by way of depreciation in the usual way as it is included as part of the cost of the underlying asset. Also, assuming the £250k is considered material, it would have to be discounted and the provision side of it adjusted upwards each year as the decommissioning wouldn't be happening for 25 years.