Electron

Hi sir,
I got 2 questions on ‘Q. Electron’

Electron has recently constructed an ecologically efficient power station. A condition of being granted the operating licence by the government is that the power station be dismantled at the end of its life which is estimated to be 20 years. The power station cost $100 million and began production on 1 July 2005. Depreciation is charged on the
power station using the straight line method. Electron has estimated at 30 June 2006, it will cost $15 million (net present value) to restore the site to its original condition using a discount rate of five per cent. Ninety-five per cent of these costs relate to the removal of the power station and five per cent relates to the damage caused through generating
energy.

Thus, the Provision for damages is 0.035 (Dr Expense Cr Liability) as follows;
Present value of obligation at 1 July 2005 (15÷1.05) = 14.3
Provision for damage through extraction (5% x 14.3) = 0.7
(0.7÷20 years) = 0.035 (rounded up to 1 in an original answer)

But, this 0.035 is calculated from the Present Value at 1 July 2005
While we recognise finance cost (14.3 X 0.95 X 5%) for provision for dismantle, Why we don’t recognise any finance cost for provision for damage at 30 June 2006 when it is one year later from the PV?

If there is no any finance cost and only recognise 0.035 at 30 June 2006,
What is provision for damage at 30 June 2007?

Thanks…