Accounting for Decommissioning and Restoration Costs Identified During an Asset’s Useful Life

Any subsequent costs incurred for decommissioning and restoration related to Property, Plant, and Equipment (PPE) should be added to the cost of the PPE. The management shall estimate these decommissioning and restoration costs which shall be the present value of the expenditures expected to be required to settle the obligation. The depreciation on such PPE shall be calculated on the revised carrying value including the estimated cost of such decommissioning and restoration cost estimated by the company

In this story, we have discussed the accounting treatment for a telecommunications company that purchased land with telecommunication towers, estimating their useful life at 40 years and applying the straight-line method (SLM) for depreciation. After 10 years, the company assessed the decommissioning and restoration costs associated with the assets.

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