IFRIC 1 – Class notes

Changes in the measurement of an existing decommissioning, restoration and similar liability that results
from changes in estimates shall be accounted for as follows:

At the date of estimate change:

Change in the amount of obligation = PV of obligation (using new estimates) – PV of obligation (using old
estimates)

If the related asset is measured using the cost model

Increase in obligation Decrease in obligation

 Change in obligation is Added to the cost of  Change in obligation is Deducted from the
asset. cost of asset.

Dr. Asset Dr. Provision for dismantling

Cr. Provision for dismantling Cr. Asset

 The entity shall consider whether there is a  The amount of change shall not exceed its
need for impairment testing as per IAS 36. carrying amount. If the amount of change is
higher than carrying amount, then the excess
shall be recognized immediately in P&L.

If the related asset is measured using the revaluation model

Increase in obligation Decrease in obligation

 Change in obligation is treated as revaluation  Change in obligation is treated as revaluation
decrease increase.

Dr. Revaluation surplus Dr. Provision for dismantling

Dr. P&L Cr. P&L (reversal of previous loss)
Cr. Provision for dismantling Cr. Revaluation surplus

 If the amount of change is higher than carrying

amount that would have been determined as
per cost model, then the excess shall be
recognized immediately in P&L.
- A change in obligation is an indication that asset may have to be revalued. If so, then revaluation
and estimate change are handled in compound entry.
- If revalued amount (i.e. fair value) is provided by valuer as net of dismantling cost, then for
revaluation accounting, revalued amount will be the sum of (i) net value determined by valuer and
(ii) present value of new dismantling obligation amount.

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