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Hello Sir,
Dec 2011
Q4(b) (i)
Will the variable amount for the environmental cost be included in the cost of the licence in a later year or only included the fixed amount and why?(150m x 0.02 cents x 1.08)?Q4(b)(ii)
as it only contingent liabilities for parent company so it will consolidate the full amount of loan in the consolidated SOFP; if this event of not going concern of subsidiary become probable, which is become actual liabilities for parent for the loan guaranteed, the $10m loan will it be take off in the Consolidated SOFP as its intragroup transaction?Thank you.
Hi
(i) We include both amounts as a provision as we have the obligation given that we intend to clean up the damage created. The variable amount is 2 cents per barrel, hence the 150m x 0.02, but the 2 cents per barrel is in present value terms at 1 Octoer 2010. To get the value of the provision at the reporting date we need to work out the final/terminal value by unwinding the discount, and so multiply by 1.08, using the 8% discount rate.
(ii) Be careful as contingent liabilities are only disclosed in the financial statements. If it is likely that it is going to have to be repaid then it would be a provision and recorded in the financial statements.
Thanks
(i)If the figure is for 30 Sep 2012(which is one year later), will the NCA for licence for oil extraction increase by the variable amount of (150,000×0.02 cent)?
or the variable amount will only affect the environmental provision?(ii)”which was previously a contingent liability, would become an actual liability and should be provided for on
Borough’s entity statement of financial position and disclosed as a current (not a non-current) liability”How about in the Borough’s consolidated statement perspective? will it need be cancelled off or consolidate the $10m provision?
Thank you.
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