CASE STUDY 4-DISMANTLING, REMOVING AND RESTORING COSTS On 1 January 2021, Aluminium Smelters Bhd purchases a Multi-Megawatt Power Generation Plant to produce sufficient power for the production of Aluminium from bauxite. The consideration for the Plant is RM50million and its installation can only be made after significant modifications are made to the site on which the Power Generation Plant is to be built. Aluminium Smelters have leased the land from the State Government for 30 years. The terms of the lease do not permit any extension after 30 years. Accordingly, Aluminium Smelters is required to dismantle the plant after 30 years. It is estimated that the cost of dismantling the Power Generation Plant and restoring the site to its original condition will be RM8 Million. Aluminium Smelters have the following borrowings from the Banks:- Overdraft RM30 Million 5.5% pa Term Loans RM250 Million 6.8% pa Revolving Credit Facility RM200 Million 7.6% pa The Finance Manager understands the requirements of MFRS 116 but is not clear as to how the dismantling, removing and restoration costs are to be calculated and accounted for, for financial reporting purposes. Problem to Consider Assist the Finance Manager on the following:- a. Determine the discount rate to be used; b. How will the obligations for dismantling, removing and restoring the site on which the Power Generation Plant is situated, be reflected, indicating whether there are any other MFRSs that may be applicable for this purpose