After a wedding in 2018, ten people died, possibly as a result of food poisoning from products sold by Lambon Catering Services. Legal proceedings have commenced, seeking damages from Lambon Catering Services but it disputes liability. Up to the date of approval of the financial statements for the year to 31 December 2018, Lambon Catering Services’ lawyers advised that it is probable that it will not be found liable. However, when Lambon Catering Services prepares the financial statements for the year to 31 December 2019, its lawyers advice that, owing to developments in the case, it is probable that it will be found liable. Required: In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, what is the required accounting treatment? i. At 31 December 2018? ii. At 31 December 2019?
After a wedding in 2018, ten people died, possibly as a result of food poisoning from
products sold by Lambon Catering Services. Legal proceedings have commenced, seeking
damages from Lambon Catering Services but it disputes liability. Up to the date of approval
of the financial statements for the year to 31 December 2018, Lambon Catering Services’
lawyers advised that it is probable that it will not be found liable. However, when Lambon
Catering Services prepares the financial statements for the year to 31 December 2019, its
lawyers advice that, owing to developments in the case, it is probable that it will be found
liable.
Required:
In accordance with IAS 37 Provisions,
required accounting treatment?
i. At 31 December 2018?
ii. At 31 December 2019?
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