Accruals

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kazflan
kazflan Registered Posts: 36 Regular contributor ⭐
in General accounting discussion
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.

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  • Miss_HJ
    Miss_HJ Registered Posts: 91 Regular contributor ⭐
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    yes release the over accrued amount.
  • blobbyh
    blobbyh Registered Posts: 2,415 Beyond epic contributor 🧙‍♂️
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    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.

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