Restoration Costs Under FRS 102 (Dilapidations)
Restoration obligations are costs to return the asset to its original condition at lease end.
What Are Restoration Costs?
Dilapidations, make-good provisions, and asset removal costs.
Accounting Treatment
Added to ROU Asset with corresponding Section 21 provision.
FRS 102 Reference: FRS 102.20.47(d), Section 21
Restoration Impact
Revising the estimate later
FRS 102 requires a provision to be reviewed at each reporting date and adjusted to the current best estimate. Close Checks asks the question and your dashboard carries it; when the answer is that the figure has changed, record it on the lease under Dilapidations Estimate Revisions, using Revise estimate. Give the date it takes effect from, normally the reporting date you reviewed it at, the revised figure, and the reason. The change is applied from that date onwards. The provision is remeasured, the difference adjusts the right-of-use asset in the period containing the date, and depreciation runs on over what is left of the term. Periods you have already reported are not restated, because a change in estimate is not an error. The step appears in its own Provision Remeasurement column on the schedule and in the exports, kept apart from the unwind of the discount: that one is a finance cost and this one is not. You can revise the rate as well as, or instead of, the figure, since the standard measures the provision including its rate. Revisions compound: each is measured against the estimate the one before it left in force, and any of them can be withdrawn, which returns the figures to the estimate previously in force. Two cases are worth knowing. Where a decrease is larger than what is left of the right-of-use asset, the asset is reduced to nil and the excess is credited to profit or loss; FRS 102 does not address that case, so Lease102 applies the treatment in the adopted international standard on similar issues, as paragraphs 10.4 to 10.6 permit. And on a lease you transitioned, the right-of-use asset was measured at the transition date and never included the provision, so there is nothing here to adjust: change it in your own ledger under Section 21. Editing the provision figure itself still recomputes the lease from its commencement date. That is the right thing for correcting an error in what was first recognised, and the wrong thing for a change in estimate, which is why the two are separate actions.
FRS 102 Reference: FRS 102.21.11, 10.16-10.17