PROVISIONS

141 Fauberg owns a number of offices in country Y and is in the process of finishing its financial statements for the year ended 31 December 20X4. In December 20X4, country Y announced changes to health and safety regulations, meaning that Fauberg’s air conditioning units will have to be replaced by 30 June 20X5. This is estimated to cost Fauberg $500,000. Fauberg has a history of compliance with regulations and intends to do the work by June 20X5. Which of the conditions for a provision will be met at 31 December 20X4? Yes/No There is a present obligation from a past event A reliable estimate can be made There is a probable outflow of economic benefits ANS There is a present obligation from a past event No A reliable estimate can be made Yes There is a probable outflow of economic benefits Yes Whilst there is an estimate of $500,000 and it is probable that Faubourg will make the changes, there is no present obligation at 31 December 20X4. Good day,Pls i don't understand why there is no present obligation since it was said in the question that Fauberg has a history of compliance with regulations which is a constructive obligation.I'll appreciate if you can explain better.