Adoding Group operates an offshore oilfield where its 20-year licensing agreement requires it to remove the oil rig at the end of production and restore the seabed. Costs of removal of the oil rig and restoration of the seabed include: 75% relates to damage caused by building the oil rig 10% relates to damage caused by regular maintenance of the oil rig 15% arises through the extraction of oil Determine which part of the removal cost should be initially recognised as the cost of the oil rig.
Adoding Group operates an offshore oilfield where its 20-year licensing agreement requires it to remove the oil rig at the end of production and restore the seabed. Costs of removal of the oil rig and restoration of the seabed include: 75% relates to damage caused by building the oil rig 10% relates to damage caused by regular maintenance of the oil rig 15% arises through the extraction of oil Determine which part of the removal cost should be initially recognised as the cost of the oil rig.
Chapter1: Financial Statements And Business Decisions
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Adoding Group operates an offshore oilfield where its 20-year licensing agreement requires it to remove the oil rig at the end of production and restore the seabed. Costs of removal of the oil rig and restoration of the seabed include:
75% relates to damage caused by building the oil rig
10% relates to damage caused by regular maintenance of the oil rig
15% arises through the extraction of oil
Determine which part of the removal cost should be initially recognised as the cost of the oil rig.
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