AASB 2026-1 Provisions and Decommissioning Disclosures in Australia: An Auditor Guide for 2026

A significant but often overlooked change to Australian accounting standards took effect for financial years beginning on or after 1 July 2025. AASB 2026-1, issued by the Australian Accounting Standards Board (AASB) in January 2026, amends AASB 137 Provisions, Contingent Liabilities and Contingent Assets to introduce new illustrative examples for the disclosure of plant decommissioning and site-restoration obligations. For Australian businesses in mining, energy, property, and infrastructure — and for the auditors who review their financial statements — these changes have immediate practical consequences.

Understanding AASB 2026-1 and the AASB 137 Amendments

AASB 137 has long required entities to recognise provisions for decommissioning and site-restoration obligations where a present obligation exists, an outflow of resources is probable, and a reliable estimate can be made. The standard also requires provisions to be discounted to present value where the time value of money is material — which, for long-dated obligations like mine closures or offshore platform decommissioning, can result in a carrying amount that appears immaterial even when the total undiscounted settlement cost is very large.

This is precisely the gap that AASB 2026-1 addresses. The amendment introduces Example 2A to the implementation guidance accompanying AASB 137, which clarifies that even when the carrying amount of a provision is immaterial due to discounting, an entity must still assess whether information about the underlying obligation is material to the financial statements.

When Immaterial Carrying Amounts Require Material Disclosures

The new guidance identifies three key factors that may make decommissioning and site-restoration information material even when the discounted carrying amount is small.

First, the magnitude of the total settlement costs — the undiscounted amount required to actually close and remediate a facility — may be very large even if the present value is modest. Second, there may be a significant or increasing risk that facilities need to be closed or decommissioned earlier than originally expected, due to climate-related transitions, shifting consumer demand, or regulatory policy changes. Third, the industry, legal, or regulatory environment may make this information particularly important to the decisions of financial statement users.

Where any of these factors apply, entities must disclose a description of the nature of the obligations and expected timing of outflows, an indication of uncertainties regarding the amount or timing, and major assumptions regarding future events such as expected closure dates.

Key Considerations for Businesses and Their Auditors

The AASB 2026-1 amendments apply to annual periods beginning on or after 1 July 2025 that end on or after 28 February 2026. For most Australian entities with a 30 June year-end, this means the amendments apply from the 2025-26 financial year — the financial statements being prepared and audited right now.

Auditors reviewing financial statements for affected entities need to assess whether management has properly applied the new guidance. This involves more than simply checking whether a provision has been recognised and measured correctly — it requires a qualitative assessment of whether the disclosures are adequate given the nature and magnitude of the underlying obligations.

• Identify all decommissioning and site-restoration obligations — Review all long-term contracts, leases, and regulatory licences to identify obligations that may give rise to provisions under AASB 137.
• Assess the undiscounted settlement cost — Even where the discounted carrying amount is immaterial, calculate the total undiscounted cost to determine whether the obligation is significant in absolute terms.
• Evaluate early closure risk — Consider whether climate transition risks, regulatory changes, or market shifts create a material risk of earlier-than-expected closure or decommissioning.
• Review disclosure adequacy — Assess whether the financial statements provide sufficient information about the nature, timing, and uncertainties of decommissioning obligations for users to make informed decisions.
• Document the materiality assessment — Maintain clear audit documentation of the qualitative and quantitative factors considered in assessing whether decommissioning disclosures are adequate.

Common Mistakes and Red Flags

The most common error in applying AASB 137 to decommissioning obligations is conflating the materiality of the carrying amount with the materiality of the disclosure. An entity may correctly conclude that a provision with a discounted carrying amount of $500,000 is immaterial to the balance sheet — but this does not mean that information about a $50 million undiscounted decommissioning obligation is immaterial to financial statement users.

Another frequent issue is failing to update decommissioning estimates to reflect changing circumstances. Where an entity's operations are in a sector facing accelerated transition — such as fossil fuels, coal-fired power generation, or certain mining activities — the risk of earlier-than-expected closure is a material uncertainty that must be disclosed.

• Treating carrying amount materiality as disclosure materiality — The two assessments are distinct. A small carrying amount does not automatically mean the disclosure is immaterial.
• Stale decommissioning estimates — Failing to update cost estimates and closure timelines to reflect current regulatory, market, and climate conditions.
• Inadequate disclosure of assumptions — Not disclosing the major assumptions underlying decommissioning estimates, such as expected closure dates and discount rates.
• Ignoring climate transition risk — Failing to consider whether climate-related regulatory changes or market shifts create a material risk of accelerated decommissioning.

Australian Regulatory Context

The AASB 2026-1 amendments sit within a broader regulatory environment in which Australian regulators are placing increasing emphasis on the quality and transparency of financial reporting for long-term obligations.

The Australian Securities and Investments Commission (ASIC) has identified provisions for decommissioning and site-restoration costs as a specific focus area for its 2026-27 financial reporting surveillance program. ASIC will review financial reports from listed and unlisted companies, registrable superannuation entities, and managed investment schemes, with particular attention to disclosures assessed against the new AASB 2026-1 guidance.

ASIC intends to review 25 audit files during 2026-27, with selection criteria including cases involving material corrections to financial reports, files identified as posing risks to audit quality, and random selection. Auditors whose clients have significant decommissioning obligations should expect heightened scrutiny.

The Australian Accounting Standards Board (AASB) issued AASB 2026-1 in January 2026 as part of its ongoing program to align Australian standards with international developments. The amendments are consistent with the IASB's work on improving disclosures about uncertainties in financial statements.

For entities subject to mandatory climate reporting under the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024, decommissioning obligations may also need to be disclosed as climate-related financial risks in the sustainability report — creating an additional layer of disclosure that auditors and assurance providers must consider.

Questions to Ask When Choosing an Auditor

If your business has decommissioning, site-restoration, or make-good obligations, these are the questions you should ask when selecting or reviewing your auditor.

1. Are you familiar with AASB 2026-1 and the new illustrative examples for decommissioning and site-restoration disclosures under AASB 137?
2. How do you assess whether decommissioning disclosures are adequate when the discounted carrying amount is immaterial?
3. How do you evaluate the risk of earlier-than-expected closure due to climate transition or regulatory change?
4. Are you aware of ASIC's 2026-27 focus on provisions for decommissioning and site-restoration costs?
5. How do you coordinate decommissioning disclosures between the financial statements and any mandatory climate reporting?
6. What experience do you have auditing entities with long-dated decommissioning obligations in sectors such as mining, energy, or infrastructure?

How MyMoney® Can Help

The AASB 2026-1 amendments to AASB 137 represent a meaningful increase in the disclosure obligations for Australian entities with decommissioning and site-restoration obligations. Getting the disclosures right requires an auditor with deep technical knowledge of the standard and an understanding of the qualitative factors that drive materiality assessments.

MyMoney® connects Australian businesses with experienced auditors who specialise in complex provisions, long-term obligations, and ASIC-focused financial reporting. Whether you need an auditor for your annual financial statements, a technical review of your AASB 137 disclosures, or assurance over your sustainability report, our network of qualified professionals can help.

Post a Brief to describe your audit requirements and receive tailored proposals from auditors with expertise in AASB 137 and decommissioning obligations. Alternatively, Browse Auditors on the MyMoney® Marketplace to find a specialist who can ensure your financial statements meet the new AASB 2026-1 requirements.