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Hi Sir, I have question here. This question is from ACCA Dec 2011 Q4,
https://oi65.tinypic.com/24lr288.jpg
I do not understand why the $20m is included in non current assets. Can you explain? Thank you in advance.
Because this is the treatment where there is an obligation (legal or constructive) as in this case with the environmental damage restoration costs.
In the course notes you’ll find a rhetorical question “Where’s the debit” towards the end of the chapter on provisions and contingencies.
The obligation is (obviously) recorded as a liability, but where’s the debit? It’s included as an additional element of the cost of the asset – in this case, a licence
Check the course notes and then come back to me if you’re still not convinced
Hi Sir, Thanks for the reply. Then I wonder why the variable elements is not charged to cost of asset? only in liability?
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