Estimate drift: explain what changed before explaining the total

1. Preserve the previous basis

Begin a revision by retaining the prior estimate, scope, assumptions, pricing basis and schedule. Do not overwrite the evidence needed to explain the movement. Establish which comparison is being made: like-for-like work, the remaining work after execution, or the full program including actual expenditure.

Classify changes before adding them together. Useful categories include physical scope, new asset evidence, execution method, schedule, market rates, actual performance and financial assumptions. Apply a consistent order to the reconciliation because interacting changes can produce different intermediate values. A visible reconciliation is more informative than assigning every difference to escalation.

2. Identify the mechanism behind the movement

A later execution date can change more than discounting. It can alter inspection needs, maintenance duration, equipment condition, vessel access and the validity of a contractor quotation. A newly discovered weight discrepancy may require a different removal method rather than a simple quantity adjustment. Explain the mechanism so that the next decision targets the cause.

Do not treat better information as automatic cost reduction. Inspection can confirm the original basis, narrow a range or reveal additional work. All three outcomes can improve the estimate. The useful question is whether the revised assumptions are better supported, not whether the total moved in the preferred direction.

NOPSEMA's proactive-planning paper warns that inadequate maintenance can make later removal more difficult and costly. That provides a regulatory context for reviewing the engineering effects of deferral; it does not establish a universal escalation rate. Planning for proactive decommissioning ↓ (opens in a new tab).

3. Reconcile engineering cost and financial reporting

AASB 137 requires provisions to be reviewed at each reporting date. AASB Interpretation 1 addresses changes in existing decommissioning liabilities, including revised cash flows, discount rates and the passage of time. The accounting treatment depends on the applicable facts and standards. An engineering cost movement should therefore be reconciled separately from the finance team's measurement and presentation adjustments. AASB 137, paragraph 59 ↗ (opens in a new tab), AASB Interpretation 1, paragraphs 2 to 4 and 8 ↗ (opens in a new tab).

The January 2026 amendments add a disclosure example involving high future decommissioning costs with an immaterial discounted carrying amount. It illustrates why information about the obligation can still be material, including where earlier closure is a significant risk. A small present value is not a physical measure of the work remaining. AASB 2026-1, application p. 5 and Example 2A p. 7 ↓ (opens in a new tab).

The amendments apply to annual periods beginning on or after 1 July 2025 that end on or after 28 February 2026. Earlier application is permitted. Applicability depends on the entity and reporting period.

4. Turn variance into an action

For each material driver, identify whether it can be resolved through evidence, a commercial enquiry, a method decision or active risk management. Assign a date for reconsideration and specify the evidence that would change the assumption. Keep improvement actions distinct from unsupported savings commitments.

The revision is useful when management can see what was learned, what was spent, what changed externally and what remains uncertain. A stable total can still deserve attention if offsetting movements conceal a less mature method or a growing schedule dependency. The movement report should make those changes visible even when the headline number looks reassuring.