Guide to Business Modelling by John Tennent

Guide to Business Modelling by John Tennent

Author:John Tennent [Tennent, John; Friend, Graham]
Language: eng
Format: epub
ISBN: 9781610395113
Publisher: PublicAffairs


Abandonment

Some assets will not only end their useful life with no value, but also create a significant liability for their disposal costs: for example, decommissioning and decontaminating a nuclear power station or abandoning an oil platform. In these circumstances, it is normal to depreciate an asset to zero over its life and to create an abandonment provision over the same period. For example, a $250m installation may be depreciated over 25 years at the rate of $10m a year plus a $2m abandonment provision. This will create a fund of $50m at the end of the asset life to pay for the dismantling and abandonment.



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