With the amendments published on 18 March 2024, the Italian Accounting Standards Board (OIC) updated accounting standards OIC 16 and OIC 31, introducing a revised framework for the accounting treatment of dismantling and restoration costs. These changes, applicable to financial statements for periods beginning on or after 1 January 2024, are intended to ensure a more accurate and faithful representation of obligations associated with the end of an asset’s useful life.
Prior to the amendments, OIC 16 did not permit the capitalisation of dismantling and restoration costs as part of the asset’s cost. Such costs were generally recognised through progressive provisions charged to the income statement over the asset’s useful life. OIC 31, in turn, did not provide specific guidance on provisions for dismantling and restoration, with the exception of landfill dismantling costs. As a result, companies were required to recognise a liability provision for these expenses, which became tax-deductible only when the costs were actually incurred.
Following the amendments, OIC 16 now provides that dismantling and restoration costs arising from legal or contractual obligations must be capitalised as an integral part of the asset’s cost. A provision for future obligations is recognised as the corresponding entry. This provision is subsequently increased through the recognition of discounting interest, which is also recorded as an increase to the same provision. The present value of these costs is then depreciated over the asset’s useful life.
For assets recognised in the user’s balance sheet because they are acquired under usage rights (for example, through leasing arrangements or concessions), OIC 31 allows dismantling and restoration costs to be capitalised as intangible assets. In this case, the corresponding provision for obligations is offset by an intangible asset recognised under “Other Intangible Assets” in accordance with OIC 24.
Assonime Circular No. 26 of 19 December 2024 examined the tax implications of the new provisions, envisaging tax recognition, for IRES and IRAP purposes, of the depreciation charges recorded, within the limits of the applicable statutory coefficients. Discounting charges should be prudently recognised in the income statement under interest expenses and are considered deductible; however, a specific interpretative ruling by the Ministry of Economy and Finance is awaited to confirm their tax deductibility.
In order to capitalise dismantling and restoration costs, prior administrative authorisation for disposal activities is required. For example, in the case of photovoltaic systems, such authorisation concerns the removal of installations from rooftops and must be supported by permission for surface operations, with an analytical identification of all eligible components. Where no legal or contractual obligation exists to incur these costs, the related provision remains relevant solely for civil law purposes, with tax deductibility confirmed only at the time the expenditure is actually incurred.
The updates to accounting standards introduced through the amendments to OIC 16 and OIC 31 represent a meaningful step towards a more accurate representation of obligations related to the dismantling and restoration of assets, while also facilitating access to tax benefits, provided that the prescribed conditions are fully met.