Accruals

kazflan

The lease on a buliding was initially for 5 years. An estimate of costs was produced to cover dilapidations. the Company has been accruing that cost based on the 5 year period. the lease has been extended, this has given a lower rental but the dilaipdation costs have not changed. The costs in reality should now be split over the 10 years. We have therefore over accrued the costs. Would I be correct that I will recalculate the new accrual and release any over accrued amount.

Miss_HJ

yes release the over accrued amount.

blobbyh

If you estimated the dilap costs five years ago - e.g. 2007 - we'd first off revisit the estimate on what they might be five years from today - e.g. 2017 - since costs may have materially changed.

If you've still over estimated, yes we'd release the over accrued amount. If not, we'd 'freeze' the current accrual and start a new one based on the difference.