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GDB # 01

 

 

A company has purchased a plant for Rs. 5 million with an estimated useful life of 10 years. In order to provide funds for replacement of plant the company has decided to create provision with equal amounts for ten years. Therefore; the company debited “Plant replacement charges” and credited “Provision for Plant replacement” in current year’s financial statements.

Comment and explain, whether the above provision meets the requirements of IAS 37?

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