X Solar Power Ltd., a power company, has a present obligation to dismantle its plant after 35 years of useful life. X Solar Power Ltd. cannot cancel…
CA Final · Financial Reporting · MTP · May 2025
X Solar Power Ltd., a power company, has a present obligation to dismantle its plant after 35 years of useful life. X Solar Power Ltd. cannot cancel this obligation or transfer to third party. X Solar Power Ltd. has estimated the total cost of dismantling at 50,00,000, the present value of which is 30,00,000. Based on the facts and circumstances, X Solar Power Ltd. considers the risk factor of 5% i.e., the risk that the actual outflows would be more from the expected present value. State how should X Solar Power Ltd. account for the obligation.
Suggested Answer and Working Notes:
The obligation should be measured at the present value of outflows i.e.,30,00,000. Further a risk adjustment of 5% i.e.,1,50,000 (₹ 30,00,000 x 5%) would be made. So, the liability will be recognised at = 30,00,000 +1,50,000 = 31,50,000.
Topics: Ind AS 37, Ind AS 23, Ind AS 19
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