The following information relates to the financial statements of Clarendon Enterprise Limited (CEL) for the year...

 

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The following information relates to the financial statements of Clarendon Enterprise Limited (CEL) for the year to 31 March 2019. The mining division of CEL has a 3 year operating licence from an overseas government(Suriname). This allows it to mine and extract copper from a particular site. When the licence began on I April 2018, CEL started to build on the site. The cost of the construction was $ 7,000.000. Suriname has no particular environmental decommissioning laws. In its past financial statements CEL has given information about the company's environmental policy and has provided examples to demonstrate that it is a responsible company that believes in restoring mining sites at the end of the extraction period. The cost of removing the construction at the end of the three years is estimated to be $ 2,000,000. The capitalized cost of the site currently shown in the trial balance is $ 7,000,000. The company has a cost of borrowing of 10%. REQUIRED: Explain the correct accounting treatment for the scenario above with appropriate calculations as necessary. (20 marks) Hint: Within your answer you must clearly explain provisions and obligations under IAS 37and the accountring treatmenr of any calculations made. The following information relates to the financial statements of Clarendon Enterprise Limited (CEL) for the year to 31 March 2019. The mining division of CEL has a 3 year operating licence from an overseas government(Suriname). This allows it to mine and extract copper from a particular site. When the licence began on I April 2018, CEL started to build on the site. The cost of the construction was $ 7,000.000. Suriname has no particular environmental decommissioning laws. In its past financial statements CEL has given information about the company's environmental policy and has provided examples to demonstrate that it is a responsible company that believes in restoring mining sites at the end of the extraction period. The cost of removing the construction at the end of the three years is estimated to be $ 2,000,000. The capitalized cost of the site currently shown in the trial balance is $ 7,000,000. The company has a cost of borrowing of 10%. REQUIRED: Explain the correct accounting treatment for the scenario above with appropriate calculations as necessary. (20 marks) Hint: Within your answer you must clearly explain provisions and obligations under IAS 37and the accountring treatmenr of any calculations made.

Answer rating: 100% (QA)

As per IAS 37 Provisions Contingent Liabilities and Contingent Assets provisions are liability of un... View the full answer