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Published byJasmin James Modified over 6 years ago
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Introduction Example for decommissioning costs for large capital assets Luxembourg, December Eurostat, JMO M4
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5. Decommissioning costs for large non-financial assets
These costs occur at end of assets life In theory, they are part of acquisition costs The estimates of consumption of fixed capital should allow for the final asset value
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5. Decommissioning costs
In practice, GFCF of asset purchase price recognised on acquisition Value depreciated to negative through full allowance of depreciation Decommissioning scored as GFCF, and written off in same year
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5. Decommissioning costs example
Government buys Nuclear Power station at the end of year 2000, cost of 200m euros Expected lifetime of 10 years Decommissioning costs estimated to be 100m euros
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Calculate consumption of fixed capital according to ESA 95 then ESA 2010 for each year of the life of the reactor (assume straight line depreciation) All values in year 2000 prices Calculate the value of the asset at the end of each year Show the effect of decommissioning at the end of the last year
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