Question

Sunny Coast Mining Limited has been mining in a particular coastal area. A requirement under the terms of the Resource Consent granted to Sunny Coast Mining Limited is that the area be restored to a state that is beneficial to the local fauna.

Explain why a liability in the form of a provision should be provided.

Answer 1

	Provision is a liability of uncertain timing or amount.
	A liability is a present obligation arising from past events and the settlement of which is expected to result in an outflow from the entity
	In this case,present obligation is that the area be restored to a state that is beneficial to the local fauna
	Past event is mining in a particular coastal area.
	Restoration will result is an outflow.
	But, there is an uncertainity regarding the amount of liability.
	Hence,a liability in the form of a provision should be provided