Decommissioning, restoration, and similar liabilities
On Jan 01, 01, entity E acquires a machine for CU 220 that is available for use on the same day. Payment is effected in cash on the same day. The useful life of the machine is three years. The machine consists of some materials that are ecologically harmful. Consequently, E is legally obliged to dispose of the machine appropriately at the end of its useful life. This obligation arises as a result of the acquisition of the machine by E, according to the relevant legal requirements. E estimates that costs of CU 92.61 will be incurred on Dec 31, 03 for disposing of the machine. The discount rate is 5% p.a.
On Dec 31, 02, E expects that the costs for disposing of the machine will be CU 63. This estimate corresponds with the amount that is ultimately paid on Dec 31, 03.
Required
Prepare any necessary entries in E”s financial statements as on Dec 31 for the years 01–03.
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