Falcon Nigeria Plc sells goods with a one-year warranty. Based on historical data, 3% of goods sold will require minor repairs costing ₦8,000 per unit and 1% will require major repairs costing ₦50,000 per unit. During the year ended 31 December 2023, the company sold 10,000 units. In accordance with IAS 37, what is the warranty provision to be recognised as at 31 December 2023?

IAS 37 requires that when a provision involves a large population of items, the obligation is estimated using expected values. Minor repairs: 3% × 10,000 units × ₦8,000 = 300 units × ₦8,000 = ₦2,400,000. Major repairs: 1% × 10,000 units × ₦50,000 = 100 units × ₦50,000 = ₦5,000,000. Total warranty provision = ₦2,400,000 + ₦5,000,000 = ₦7,400,000. The expected-value approach is appropriate here because the warranty obligation covers a portfolio of contracts, making the aggregate outcome reliably estimable.