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Sasi mcvv

77 Points Posted on 09 June 2021

please explain why PRESENT VALUE of cost of decommissioning, restoration is taken instead of actual value

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Quick Summary

This discussion explains the accounting practice of using the present value (PV) for decommissioning and restoration costs, rather than their future actual value. This is because accounting for impairment of Property, Plant, and Equipment (PPE) requires future cash flows to be discounted to their present value. This method aligns with how recoverable amounts are calculated during impairment testing, ensuring financial figures reflect current economic realities.

CA. Sourav Sarkar

Chartered Accountant

16188 Points Posted on 09 June 2021

Yes PV is to be taken as for calculation impairment present value should be shown as on the year of impairment of PPE

yasaswi gomes

My grammar is 💯 good I

5110 Points Posted on 09 June 2021

That is the future value measurement and one must discount it to know the present value.

VIU during impairment also discounts all future CGU Cashflows using a pre tax discount rate to know the recoverable amount while testing for impairment,

Mostly it’s like rule of thumb that accounting numbers will be in historic cost or it’s fair value in PV terms.