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Decommissioning costs

Outcome paper:English
Cover note:English    Español
Comment template:English    Español
Global consultation status:Open
Deadline for comments:28/10/2010
Number of comments:19
Comments from the global consultation
Posted onProvided byComments
23/12/2010Central Bureau of Statistics Israel1. Do you agree that where terminal costs are anticipated the costs should be depreciated as consumption of fixed capital over the life of the underlying asset and the expenditure recorded as gross fixed capital formation when incurred?
Yes
  2. Do you agree that if the initial estimate of terminal costs is lower than the final costs actually incurred then these extra costs should be treated as gross fixed capital formation and immediately treated as consumption of fixed capital in that period? Further, do you agree that if the initial estimate of terminal costs is higher than the final costs actually incurred (or these final costs are zero for the operator) then the remaining value of the terminal costs at the time of decommissioning should be removed from the capital stock via the other changes in volume of asset account?
Yes to both questions. However, the estimates that were wrong in the former periods are not amended. One should explain, why they are not amended – is it because the estimates were made according to all available information at the time – an expectations approach?
  3. Do you agree that remedial costs be treated as gross fixed capital formation when incurred in circumstances in which the expenditure gives rise to a fixed asset – most commonly land improvements?
Yes
04/11/2010Switzerland/Federal Statistical Office1. Do you agree that where terminal costs are anticipated the costs should be depreciated as consumption of fixed capital over the life of the underlying asset and the expenditure recorded as gross fixed capital formation when incurred?
Yes
  2. Do you agree that if the initial estimate of terminal costs is lower than the final costs actually incurred then these extra costs should be treated as gross fixed capital formation and immediately treated as consumption of fixed capital in that period? Further, do you agree that if the initial estimate of terminal costs is higher than the final costs actually incurred (or these final costs are zero for the operator) then the remaining value of the terminal costs at the time of decommissioning should be removed from the capital stock via the other changes in volume of asset account?
Yes
  3. Do you agree that remedial costs be treated as gross fixed capital formation when incurred in circumstances in which the expenditure gives rise to a fixed asset – most commonly land improvements?
Yes
02/11/2010New Zealand/Statistics New Zealand4. Any other comments?
Statistics New Zealand does not currently have sufficient subject matter expertise to comment on the questions raised for issue 15a: Decommissioning Costs. Relevant agencies were contacted but did not feel in a position to comment on the specific questions raised.
29/10/2010Malaysia/Department of Statistics4. Any other comments?
1. The Department of Statistics Malaysia (DOSM) has no experience in developing any environmental account using the SEEA framework. However, DOSM is currently trying to develop one of the SEEA account (eg Water account) with the experience and knowledge gain while visiting Australia Bureau Statistics (ABS), and also with the guide of the SEEA 2003. However DOSM, experience constrains in developing this account with lack of expertise in this field, human resources and budget. 2. DOSM also wants to learn in detail how to develop the SEEA account. Please inform and include us if there is any training/workshop to be conducted in future. 3. Therefore DOSM is unable to contribute fruitful comments for the revision of the SEEA. However, DOSM would like to be involved in further development of this matter.
28/10/2010United Nations Statistics Division1. Do you agree that where terminal costs are anticipated the costs should be depreciated as consumption of fixed capital over the life of the underlying asset and the expenditure recorded as gross fixed capital formation when incurred?
Yes
  2. Do you agree that if the initial estimate of terminal costs is lower than the final costs actually incurred then these extra costs should be treated as gross fixed capital formation and immediately treated as consumption of fixed capital in that period? Further, do you agree that if the initial estimate of terminal costs is higher than the final costs actually incurred (or these final costs are zero for the operator) then the remaining value of the terminal costs at the time of decommissioning should be removed from the capital stock via the other changes in volume of asset account?
Yes, if the anticipated terminal cost is lower than the final costs actually incurred then these extra costs should be treated as gross fixed capital formation and written off as consumption of fixed capital at the time the costs are incurred. Yes, if the initial estimate of terminal costs is higher than the final costs actually incurred then the remaining value of the terminal costs should be deducted from the capital formation via the ‘other changes in volume of asset account’ during the period decommissioning took place.
  3. Do you agree that remedial costs be treated as gross fixed capital formation when incurred in circumstances in which the expenditure gives rise to a fixed asset – most commonly land improvements?
Yes
  4. Any other comments?
It seems odd that the expenditure incurred for the same activity ‘decommissioning’ by the ‘operator’ and the government affects the economy differently. While in both cases it is treated as gross fixed capital formation but in the case of operator it is written off during the same period and in case of government it is written off over the longer period (over the life of the asset ‘land improvement’) as it is proposed to be treated as remedial cost (para 18 of the outcome paper).
28/10/2010United Kingdom/Office for National Statistics1. Do you agree that where terminal costs are anticipated the costs should be depreciated as consumption of fixed capital over the life of the underlying asset and the expenditure recorded as gross fixed capital formation when incurred?
Yes. Propose include guidance on how such costs should be spread over the asset life. Usual approach for oil and gas would be on an (expected) unit of production basis rather than a straight line basis.
  2. Do you agree that if the initial estimate of terminal costs is lower than the final costs actually incurred then these extra costs should be treated as gross fixed capital formation and immediately treated as consumption of fixed capital in that period? Further, do you agree that if the initial estimate of terminal costs is higher than the final costs actually incurred (or these final costs are zero for the operator) then the remaining value of the terminal costs at the time of decommissioning should be removed from the capital stock via the other changes in volume of asset account?
Yes to both.
  3. Do you agree that remedial costs be treated as gross fixed capital formation when incurred in circumstances in which the expenditure gives rise to a fixed asset – most commonly land improvements?
Yes
  4. Any other comments?
Oil rigs should be referred to as oil platforms.
28/10/2010Canada/Statistics Canada1. Do you agree that where terminal costs are anticipated the costs should be depreciated as consumption of fixed capital over the life of the underlying asset and the expenditure recorded as gross fixed capital formation when incurred?
We agree, provided that the terminal costs can be anticipated with a degree of certainty. Otherwise deducting these costs could lower resource rents unduly and thereby lower the NPV of reserves. In order to estimate terminal costs, firms need to assume a fixed reserve life in a mine-site; but in reality reserve lives usually do change over time as they are affected by a number of variables such as resource price, extraction technology and discovery. This may be one of the largest obstacles to accurately anticipating terminal costs.
  2. Do you agree that if the initial estimate of terminal costs is lower than the final costs actually incurred then these extra costs should be treated as gross fixed capital formation and immediately treated as consumption of fixed capital in that period? Further, do you agree that if the initial estimate of terminal costs is higher than the final costs actually incurred (or these final costs are zero for the operator) then the remaining value of the terminal costs at the time of decommissioning should be removed from the capital stock via the other changes in volume of asset account?
Agree. This are also in keeping with SNA 2008 treatment, as noted.
  3. Do you agree that remedial costs be treated as gross fixed capital formation when incurred in circumstances in which the expenditure gives rise to a fixed asset – most commonly land improvements?
Agree.
  4. Any other comments?
With respect to collecting data on anticipated decommissioning costs we would anticipate that obtaining this information could present a challenge for statistical agencies, esp. in regards to respondent burden.
28/10/2010Botswana/Central Statistics Office1. Do you agree that where terminal costs are anticipated the costs should be depreciated as consumption of fixed capital over the life of the underlying asset and the expenditure recorded as gross fixed capital formation when incurred?
Yes
  2. Do you agree that if the initial estimate of terminal costs is lower than the final costs actually incurred then these extra costs should be treated as gross fixed capital formation and immediately treated as consumption of fixed capital in that period? Further, do you agree that if the initial estimate of terminal costs is higher than the final costs actually incurred (or these final costs are zero for the operator) then the remaining value of the terminal costs at the time of decommissioning should be removed from the capital stock via the other changes in volume of asset account?
Yes
  3. Do you agree that remedial costs be treated as gross fixed capital formation when incurred in circumstances in which the expenditure gives rise to a fixed asset – most commonly land improvements?
Yes
28/10/2010Mexico/INEGI1. Do you agree that where terminal costs are anticipated the costs should be depreciated as consumption of fixed capital over the life of the underlying asset and the expenditure recorded as gross fixed capital formation when incurred?
Yes, we agree, because it arises mainly due to the ability to prevent the terminal costs, by estimating the asset life. When this is not possible, they should be treated as terminal remediation costs at the moment when incurred and should be treated as fixed capital consumption.
  2. Do you agree that if the initial estimate of terminal costs is lower than the final costs actually incurred then these extra costs should be treated as gross fixed capital formation and immediately treated as consumption of fixed capital in that period? Further, do you agree that if the initial estimate of terminal costs is higher than the final costs actually incurred (or these final costs are zero for the operator) then the remaining value of the terminal costs at the time of decommissioning should be removed from the capital stock via the other changes in volume of asset account?
Yes, we agree. Because it is the best way to make an accounting balance of the capital accounts, when is higher it is recorded as fixed gross capital formation, when it is lower or zero should be recorded in the volume changes on the capital accounts.
  3. Do you agree that remedial costs be treated as gross fixed capital formation when incurred in circumstances in which the expenditure gives rise to a fixed asset – most commonly land improvements?
Yes, we agree. The result after the estimate of the useful life of an asset, and to aply the remedial costs, will be a good that should be registered as a new fixed asset.
  4. Any other comments?
Not at the moment
28/10/2010Austria/Statistics Austria1. Do you agree that where terminal costs are anticipated the costs should be depreciated as consumption of fixed capital over the life of the underlying asset and the expenditure recorded as gross fixed capital formation when incurred?
We agree.
  2. Do you agree that if the initial estimate of terminal costs is lower than the final costs actually incurred then these extra costs should be treated as gross fixed capital formation and immediately treated as consumption of fixed capital in that period? Further, do you agree that if the initial estimate of terminal costs is higher than the final costs actually incurred (or these final costs are zero for the operator) then the remaining value of the terminal costs at the time of decommissioning should be removed from the capital stock via the other changes in volume of asset account?
We agree.
  3. Do you agree that remedial costs be treated as gross fixed capital formation when incurred in circumstances in which the expenditure gives rise to a fixed asset – most commonly land improvements?
We agree.
28/10/2010Denmark/Statistics Denmark1. Do you agree that where terminal costs are anticipated the costs should be depreciated as consumption of fixed capital over the life of the underlying asset and the expenditure recorded as gross fixed capital formation when incurred?
Yes
  2. Do you agree that if the initial estimate of terminal costs is lower than the final costs actually incurred then these extra costs should be treated as gross fixed capital formation and immediately treated as consumption of fixed capital in that period? Further, do you agree that if the initial estimate of terminal costs is higher than the final costs actually incurred (or these final costs are zero for the operator) then the remaining value of the terminal costs at the time of decommissioning should be removed from the capital stock via the other changes in volume of asset account?
Yes
  3. Do you agree that remedial costs be treated as gross fixed capital formation when incurred in circumstances in which the expenditure gives rise to a fixed asset – most commonly land improvements?
Yes
28/10/2010Latvia/Central Statistical Bureau1. Do you agree that where terminal costs are anticipated the costs should be depreciated as consumption of fixed capital over the life of the underlying asset and the expenditure recorded as gross fixed capital formation when incurred?
Yes, we agree that when terminal costs are anticipated they should be recorded as consumption of fixed capital over life of underlying asset and as gross fixed capital formation when those costs incurred.
  2. Do you agree that if the initial estimate of terminal costs is lower than the final costs actually incurred then these extra costs should be treated as gross fixed capital formation and immediately treated as consumption of fixed capital in that period? Further, do you agree that if the initial estimate of terminal costs is higher than the final costs actually incurred (or these final costs are zero for the operator) then the remaining value of the terminal costs at the time of decommissioning should be removed from the capital stock via the other changes in volume of asset account?
Yes we agree.
  3. Do you agree that remedial costs be treated as gross fixed capital formation when incurred in circumstances in which the expenditure gives rise to a fixed asset – most commonly land improvements?
Yes we agree.
28/10/2010Lithuania/Statistics Lithuania1. Do you agree that where terminal costs are anticipated the costs should be depreciated as consumption of fixed capital over the life of the underlying asset and the expenditure recorded as gross fixed capital formation when incurred?
Terminal costs incurred to prevent environmental problems when production ceases (decommissioning of nuclear power plants, final storage of nuclear waste, sealing of landfills, etc.) should be anticipated during the production periods prior to closure and provisions made for them should be met during the life of the asset. Taking into account the considerations on this issue presented in an Outcome paper, Statistics Lithuania supports the recommendation given above.
  2. Do you agree that if the initial estimate of terminal costs is lower than the final costs actually incurred then these extra costs should be treated as gross fixed capital formation and immediately treated as consumption of fixed capital in that period? Further, do you agree that if the initial estimate of terminal costs is higher than the final costs actually incurred (or these final costs are zero for the operator) then the remaining value of the terminal costs at the time of decommissioning should be removed from the capital stock via the other changes in volume of asset account?
Yes, Statistics Lithuania supports this recommendation.
  3. Do you agree that remedial costs be treated as gross fixed capital formation when incurred in circumstances in which the expenditure gives rise to a fixed asset – most commonly land improvements?
Yes, we agree.
28/10/2010Lebanon/Central Administration of Statistics1. Do you agree that where terminal costs are anticipated the costs should be depreciated as consumption of fixed capital over the life of the underlying asset and the expenditure recorded as gross fixed capital formation when incurred?
Yes
  2. Do you agree that if the initial estimate of terminal costs is lower than the final costs actually incurred then these extra costs should be treated as gross fixed capital formation and immediately treated as consumption of fixed capital in that period? Further, do you agree that if the initial estimate of terminal costs is higher than the final costs actually incurred (or these final costs are zero for the operator) then the remaining value of the terminal costs at the time of decommissioning should be removed from the capital stock via the other changes in volume of asset account?
Yes
  3. Do you agree that remedial costs be treated as gross fixed capital formation when incurred in circumstances in which the expenditure gives rise to a fixed asset – most commonly land improvements?
Yes
  4. Any other comments?
No comment
28/10/2010Australia/Bureau of Statistics1. Do you agree that where terminal costs are anticipated the costs should be depreciated as consumption of fixed capital over the life of the underlying asset and the expenditure recorded as gross fixed capital formation when incurred?
Agree
  2. Do you agree that if the initial estimate of terminal costs is lower than the final costs actually incurred then these extra costs should be treated as gross fixed capital formation and immediately treated as consumption of fixed capital in that period? Further, do you agree that if the initial estimate of terminal costs is higher than the final costs actually incurred (or these final costs are zero for the operator) then the remaining value of the terminal costs at the time of decommissioning should be removed from the capital stock via the other changes in volume of asset account?
Agree
  3. Do you agree that remedial costs be treated as gross fixed capital formation when incurred in circumstances in which the expenditure gives rise to a fixed asset – most commonly land improvements?
Agree
28/10/2010China1. Do you agree that where terminal costs are anticipated the costs should be depreciated as consumption of fixed capital over the life of the underlying asset and the expenditure recorded as gross fixed capital formation when incurred?
yes
  2. Do you agree that if the initial estimate of terminal costs is lower than the final costs actually incurred then these extra costs should be treated as gross fixed capital formation and immediately treated as consumption of fixed capital in that period? Further, do you agree that if the initial estimate of terminal costs is higher than the final costs actually incurred (or these final costs are zero for the operator) then the remaining value of the terminal costs at the time of decommissioning should be removed from the capital stock via the other changes in volume of asset account?
yes
  3. Do you agree that remedial costs be treated as gross fixed capital formation when incurred in circumstances in which the expenditure gives rise to a fixed asset – most commonly land improvements?
yes
27/10/2010Pakistan/Federal Bureau of Statistics4. Any other comments?
Same “Reply” as given under Issue # 4
20/10/2010Jordan/Department of Statistics1. Do you agree that where terminal costs are anticipated the costs should be depreciated as consumption of fixed capital over the life of the underlying asset and the expenditure recorded as gross fixed capital formation when incurred?
Yes we agree, in cases where there is some sharing of resource rent must there be an effective partitioning of the value of the mineral and energy resource between the legal owner and the extractor, to ensure the rights of both owner and extractor
  2. Do you agree that if the initial estimate of terminal costs is lower than the final costs actually incurred then these extra costs should be treated as gross fixed capital formation and immediately treated as consumption of fixed capital in that period? Further, do you agree that if the initial estimate of terminal costs is higher than the final costs actually incurred (or these final costs are zero for the operator) then the remaining value of the terminal costs at the time of decommissioning should be removed from the capital stock via the other changes in volume of asset account?
Ok
  3. Do you agree that remedial costs be treated as gross fixed capital formation when incurred in circumstances in which the expenditure gives rise to a fixed asset – most commonly land improvements?
Ok
  4. Any other comments?
No
20/09/2010Ecuador/INEC1. Do you agree that where terminal costs are anticipated the costs should be depreciated as consumption of fixed capital over the life of the underlying asset and the expenditure recorded as gross fixed capital formation when incurred?
We are agree with this issue, because that where terminal costs are anticipated the costs should be depreciated as consumption of fixed capital over the life of the underlying asset and the expenditure recorded as gross fixed capital formation when incurred
  2. Do you agree that if the initial estimate of terminal costs is lower than the final costs actually incurred then these extra costs should be treated as gross fixed capital formation and immediately treated as consumption of fixed capital in that period? Further, do you agree that if the initial estimate of terminal costs is higher than the final costs actually incurred (or these final costs are zero for the operator) then the remaining value of the terminal costs at the time of decommissioning should be removed from the capital stock via the other changes in volume of asset account?
We are agree
  3. Do you agree that remedial costs be treated as gross fixed capital formation when incurred in circumstances in which the expenditure gives rise to a fixed asset – most commonly land improvements?
We are agree
 

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