Provision for dismantling

having set up the provision on day one at its present value, discounted at the entity's cost of capital, we now need to unroll that discount So we need to multiply $2.63 million by 1.08 and that gives us a provision to carry forward as at 31 December, 20X1 of $2.84 million Incidentally, the carry forward amount at the end of 20X2 would be $2.84 x 1.08 = $3.07 For 20X3, the carry forward would be $3.31 and for 20X4, the carry forward would be $3.58 and as at the end of 20X5 the provision would be increased to $3.86 at which time Rainbird will need to restore the site to the local authority and will incur the cost of $3.86 The double entry will therefore be, on 31 December, 20X5: Dr Provision $3.86 Cr Cash $3.86 OK?