Reference no: EM133187006

Question - On 1 January 2019, the company acquired a new plant costing £10 million. This plant will require a complete overhaul after five years of use, at an estimated cost of £1 million. Accordingly, the company wishes to make a provision of £200,000 for plant overhaul costs in its financial statements for the year to 31 December 2019 and then to increase this provision by £200,000 in each of the next four years. This will have the effect of spreading the overhaul costs evenly over the years 2019 to 2023.  Please, prescribe the accounting treatment for this type of expenditure. This is not a provision.