IFRIC 1—Changes in Existing Decommissioning, Restoration and Similar Liabilities

IFRIC 1 applies to changes in the MEASUREMENT of any existing decommissioning, restoration or similar liability that is both recognized as part of the cost of PPE as per IAS 16 and recognized as liability as per IAS 37.


Under IAS 16, the cost of property, plant and equipment includes the estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
IAS 37 contains requirements for Measurement of such decommissioning, restoration and similar liabilities.
It also requires that such provisions are REVIEWED at each reporting date and adjusted to reflect the best estimate of the expected outcome.
This ‘Interpretation’ provides GUIDANCE on how to account for the effect of subsequent changes in the Measurement of decommissioning, and restoration provision.
Carrying amount of provision might need to change in order to reflect,
(a) Unwinding of the discount; AND
(b) Change in estimate including the following:
– Timing of the cash flows
– Size of the cash flows; OR
– Discount Rate
ifric 1

1. Change in Estimate

(a) Increase in Provision for Decommissioning and Restoration Cost
‘Cost Model’
Increases Carrying Amount of asset. The asset needs to be tested for impairment in accordance with IAS 36.

‘Revaluation Model’
Decreases revaluation surplus to the extent of credit balance in the revaluation surplus in respect of that asset. Further increase in provision is debited to P&L.
(b) Decrease in Provision for Decommissioning and Restoration Cost
´Cost Model´
Decreases the carrying amount of the asset to the extent of the debit balance of such asset. Further decrease in provision is credited to P&L.

´Revaluation Model´
It is CREDITED in the following order:
– P&L account to the extent of reversal of revaluation deficit on the asset that was previously recognized in the P&L account.
– Revaluation surplus to the extent that revaluation surplus does not exceed the carrying amount of asset.
– P&L account.
(c) Other Concepts
´Cost Model´
The adjusted depreciable amount of the asset is depreciated over its remaining useful life.

´Revaluation Model´
(i) A change in the provision is an indication that the asset may have to be revalued in order to ensure that the carrying amount does NOT differ materially from the fair value of the asset at the end of the reporting period.
(ii) The change in the revaluation surplus arising from a change in the liability is separately identified and disclosed as such.

2. Unwinding of Discount

The periodic unwinding of discount is RECOGNIZED in the P&L account as a finance cost as it occurs.

[Capitalization under IAS 23 Borrowing Cost is NOT permitted].


IFRIC 1 ISSUED in May 2004 provides guidance on accounting for changes in decommissioning, restoration and similar liabilities that have previously been recognized both as part of the cost of an item of property, plant and equipment under IAS 16 and as a provision (liability) under IAS 37.

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