CERTYNEX IFRS ACADEMY

Elmara estimated the cash flows for restoring a site by increasing them with a margin for the risk of cost overruns. It then discounts these cash flows at a pre-tax rate increased by a premium for the same overrun risk. Where is the error?

The cash flows should have been discounted at a post-tax rate.

The same risk is taken into account both in the cash flows and in the rate.

The cash flows should not have been discounted.

The rate should have been the one applicable when the provision was first recognised.