Provision for Dismantling of Fixed Assets

Comparison between Indian GAAP and Ind-AS/ IFRS

An acquisition of an asset/ right to construct an asset may come with an obligation for the entity to dismantle the asset and restore the site upon completion of the desired purpose to be achieved from the asset. This obligation is often seen in Oil Rigs, mines etc.


While there is no specific guidance under Indian GAAP to consider such costs as part of the cost of the fixed assets, an indirect guidance comes from AS-29 wherein a provision is created on such dismantling costs and capitalised into the fixed assets. However, such provision is not discounted to its present value.

However, under Ind-AS/ IFRS, the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, further discounted to its present value is required to be included in the cost of the respective item of Property, Plant and Equipment (PPE).

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