On $1$ October $20$X$7.$ Promoil acquired a newly constructed oil platform at a cost of $$30$

million together with the right to extract oil from an offshore oilfield under a government

license. The terms of the licence are that Promoil will have to remove the platform $($which

will then have no value$)$ and restore the sea bed to an environmentally satisfactory condition

in ten years$$ time when the oil reserves have been exhausted. The estimated cost of this in ten

years$$ time will be $ $15$ million. The present value of $$1$ receivable in ten years at the

appropriate discount rate for Promoil of $8\%$ is $$0\mathrm{.}46.$

Required: Explain & quantify how the oil platform should be treated in the financial

statements of Promoil for the year ended $30$ September $20$X$8$ and $20$X$9.$On $1$ October $20$X$7.$ Promoil acquired a newly constructed oil platform at a cost of $$30$

million together with the right to extract oil from an offshore oilfield under a government

license. The terms of the licence are that Promoil will have to remove the platform $($which

will then have no value$)$ and restore the sea bed to an environmentally satisfactory condition

in ten years$$ time when the oil reserves have been exhausted. The estimated cost of this in ten

years$$ time will be $ $15$ million. The present value of $$1$ receivable in ten years at the

appropriate discount rate for Promoil of $8\%$ is $$0\mathrm{.}46.$

Required: Explain & quantify how the oil platform should be treated in the financial

statements of Promoil for the year ended $30$ September $20$X$8$ and $20$X$9.$