Company B operates an offshore oilfield where its licensing agreement requires it to remove the oil rig at the end of production and restore the seabed. 90% of the eventual costs relates to the removal of the oil rig and restoration of damage caused by building it, and 10% arises through the extraction of oil. At the balance sheet date, the rig has been constructed but no oil has been extracted.

Required:

Should Company B recognise any provisions or disclose any contingencies for the current period?

Answer rating: 100% (QA)

Yes Company B should recognize a provision and disclose a contingent liability in its current period ... View the full answer