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can i know why the finance cost of 400 is again added in the provision.
Provision for property restoration costs (5,000 + 400 above) 5,400
isn’t it the 5000 that has to be shown as provision?
The $5,000 is the PRESENT VALUE of the cost of restoration as on day 1 of this year
Now we need to unroll the $5,000 at the rate of 8% because we’re one year closer to having to restore the premises
The double entry is therefore:
Dr statement of profit or loss $400 (8% x $5,000)
Cr statement of financial position $400