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Under AS 10, how is the estimated cost of dismantling and removing an item of PPE (an obligation arising on its acquisition) treated?
ACharged fully to profit and loss when incurred
BIgnored until the asset is actually dismantled
CShown only as a contingent liability
DIncluded in the initial cost of the asset
Answer & Solution
Correct answer: D. Included in the initial cost of the asset
1. AS 10 states the cost of an item of PPE includes the initial estimate of dismantling and site-restoration obligations.
2. The obligation arises on acquiring or installing the asset.
3. The estimate is therefore added to the asset's initial cost (here ₹3,25,000 is capitalised).
_Source: ICAI BoS CA Intermediate Paper 1 (Advanced Accounting), Sept 2025 MCQ — Q.9, AS 10 Property, Plant & Equipment._
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