Accounting · Provisions and Contingencies

Bratton Co is finalizing its financial statements for the year ended 31 December 20X5. The following issues have been identified: 1. In December 20X5, the government announced new energy-efficiency regulations that require all factories to install carbon-scrubbing filters by June 20X6. Bratton Co estimates this will cost $800,000 and management is committed to carrying out the work. 2. Bratton Co has a widely publicized environmental policy where it promises to decontaminate any land it uses, even in countries where there is no legal requirement to do so. In 20X5, it began a new mining project in a country with no environmental laws. The estimated future cost to decontaminate this site is $2 million (present value). 3. The company is defending a patent infringement claim. Lawyers believe there is a 40% chance Bratton Co will lose and have to pay $1.5 million, but a 60% chance they will win and pay nothing. What is the total provision that should be recognized in the statement of financial position as at 31 December 20X5?