CERTYNEX IFRS ACADEMY

Fervelline must decommission a test platform in 20 years, at an estimated cost of 3,000,000; the effect of discounting is material. Its accountant recognises a provision of 3,000,000. What is the error?

No provision is required, as the expenditure is too far off.

The provision should have been built up gradually over 20 years.

The provision should have been discounted.

The provision should have been increased by 20 years of inflation and then recognised without discounting.