Asset Retirement Obligation (ARO) Provision Calculation

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What are the factors that should be considered when estimating average restoration costs for leased or other assets?

Historical and current experience for comparable assets with comparable levels of property, plant and equipment and restoration needs.

In the absence of historical or current experience, how should the best estimate of restoration costs be determined?

Based on quotations obtained from relevant suppliers or an equally rigorous internal costing process.

What are the two adjustments that must be made when using historical or current costs to determine the best estimate of restoration costs?

Known factors that will impact the future costs and expected future inflation.

What type of changes may need to be considered when adjusting historical or current costs for future restoration?

Legislative or other changes that will change the cost of restoring a site. Signup and view all the answers

Why is it necessary to estimate the cost of inflation when using historical or current costs to determine the best estimate of restoration costs?

To reflect the expected cost of inflation between the reporting period date and the date at which the restoration cost is expected to be incurred. Signup and view all the answers

What is the requirement for inflation assumptions when estimating restoration costs?

They must reflect a realistic expectation of future inflation that will apply to ARO costs before they crystallise. Signup and view all the answers

What should be maximised when estimating restoration costs?

The use of observable inputs. Signup and view all the answers

What is the purpose of estimating restoration costs in the context of ARO provisioning?

To determine the amount of provision required for the estimated cost of restoring a leased or other asset. Signup and view all the answers

How should the estimated cost of inflation be reflected in the restoration cost estimate?

It should be included in the estimate of the future restoration cost. Signup and view all the answers

What is the significance of using observable inputs when estimating restoration costs?

It provides a reliable and verifiable basis for the estimate. Signup and view all the answers

Asset Retirement Obligation (ARO) Provision Calculation

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Questions and Answers

What are the factors that should be considered when estimating average restoration costs for leased or other assets?

In the absence of historical or current experience, how should the best estimate of restoration costs be determined?

What are the two adjustments that must be made when using historical or current costs to determine the best estimate of restoration costs?

What type of changes may need to be considered when adjusting historical or current costs for future restoration?

Why is it necessary to estimate the cost of inflation when using historical or current costs to determine the best estimate of restoration costs?

What is the requirement for inflation assumptions when estimating restoration costs?

What should be maximised when estimating restoration costs?

What is the purpose of estimating restoration costs in the context of ARO provisioning?

How should the estimated cost of inflation be reflected in the restoration cost estimate?

What is the significance of using observable inputs when estimating restoration costs?

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