Within this instance, audit client is recommended to accrue for reinstatement expense. Now the issue is, how you can accrue for it, and How much to accrue for it? Audit client is expected to receive a quote from relevant service provider to estimate the reinstatement expense necessary to reinstate thee premise to its original condition (immediately after factoring within the inflation in the upcoming years till it end with the lease period).
The subsequent accounting entries for provision for reinstatement as follow:
Debit: Reinstatement Cost (to become recorded in Fixed Asset)
Credit: Provision for reinstatement Cost (to become recorded in Accrual)
The reinstatement cost capitalized as fixed asset should be depreciated more than the lease time period. For that reason, it can be evident that the reinstatement cost is actually expensed off on a straight line basis up until it finish with the lease period.