10 Questions
What is the ARO provision and ARO asset recognized at the year ended 31 March 20X2?
€960,874
What are the entries recorded in the year ended 31 March 20X2 when the ARO provision is increased?
DR Interest expense 23,436, CR ARO provision 23,436
What is the ARO provision and ARO asset recognized at the year ended 31 March 20X3?
€1,149,045
What are the reasons for the increase in the provision of €188,171 in the year ended 31 March 20X3?
Combination of passage of time and increase in estimated restoration costs
What are the accounting entries recorded in the year ended 31 March 20X3 for the increase in provision?
DR Interest expense 24,022, DR ARO Asset 164,149, CR ARO provision 188,171
Why is a corresponding tangible fixed asset recorded upon recognition of a provision?
To recognize the asset that will be restored in the future
What is the discount rate used to calculate the present value of the restoration cost?
2.5%
How is the ARO period updated in March 20X3?
From 9 years to 8 years
What is the impact on the provision when the estimated restoration cost increases by €200,000?
The provision increases by €200,000
Why is interest expense recognized in the year ended 31 March 20X3?
To recognize the effect of time on the provision
Calculate restoration costs considering historic rates, inflation, and discount rates in a given economy. Apply concepts of present value, discounting, and inflation rates to find the resultant cost.
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