The following two issues relate to Spiko Co's mining

Issue $1$: Spiko Co began operating a new mine in January $20$X$3$ under a five$-$year government licence

which required Spiko Co to landscape the area after mining ceased at an estimated cost of $$100,000.$

Issue $2$: During $20$X$4,$ Spiko Co's mining activities caused environmental pollution on an adjoining

piece of government land. There is no legislation which requires Spiko Co to rectify this damage,

however, Spiko Co does have a published environmental policy which includes assurances that it will

do so$.$ The estimated cost of the rectification is $$1,000,000.$ Assume a cost of capital of $8\%.$

In accordance with IAS $37$ Provisions, Contingent Liabilities and Contingent Assets, which of the

following statements is correct $($give reasons and quantify where necessary $)$ in respect of Spiko Co's

financial statements for the year ended $31$ December $20$X$4?$

$1.$ A provision is required for the cost of both issues $1$ and $2$

$2.$ Both issues $1$ and $2$ require disclosure only

$3.$ A provision is required for the cost of issue $1$ but issue $2$ requires disclosure only

$4.$ Issue $1$ requires disclosure only and issue $2$ should be ignored