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The provision mentioned in this case is 186276.

Financial Reporting

On a provision how can you charge interest? The provision amt can be invested and interest can be earned on such amount invested. Video Details ------------- Ind AS - CA Final Ind AS 16 Property, Plant and Equipment #4. Illustration 1: Initial Measurement

Pratham NA!K

CA Inter

★ 100

02-Oct-24 14:11

226

Answers (1)

Firstly, we are not investing the amount calculated as provision. It is an estimate of decommissioning liability which will be incurred in future. We create liability at present value. This present value increases as time passes due to time value of money/interest component. Hence we add interest to the provision/liability amount. This concept is similar to what you learn in AS-10/AS-29 at CA Inter level.

CA Suraj Lakhotia

Admin

03-Oct-24 09:01

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