- 3 Marks
FR – Nov 2023 – L2 – Q2d – Financial Reporting Standards and Their Applications
Explain the financial reporting treatment of decommissioning costs in the financial statements of Taini Ltd under IAS 37.
Question
Taini Ltd (Taini) is a listed mining company that operates in the Bono Region with a ten-year term concession commencing on 1 April 2022. After the expiry of the current mining term, Taini has a duty to rehabilitate the area. These rehabilitations are anticipated to cost GH¢12.09 million on April 1, 2032. On April 1, 2022, the present value of the restoration cost was calculated using the company’s 8% cost of capital at GH¢5.6 million.
Required:
In accordance with IAS 37: Provisions, Contingent Liabilities and Contingent Assets, explain the financial reporting treatment of the above transaction in the financial statements of Taini Ltd for the year ended 31 March 2023.
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