As at 30 June 2020, Company A is involved in a legal dispute with a supplier in relation to the early termination of the exclusive licence agreement between the two entities. The supplier is seeking damages of $40 million. The directors of COMPANY A believe they will be successful in defending the claim. Company A1s lawyers have advised that it is a 90 percent probability that the entity would not be found liable. In accordance with /AS 37Provisions, Contingent Liabilities and Contingent Assets, which of the following is the most appropriate option for Company A when preparing its financial report for 30 June 2020? 1) Do nothing. 2) Disclose information about the possible liability as a contingent liability. 3) Recognise a provision for the best estimate of the obligation to the supplier. 4) Recognise a contingent liability for the best estimate of the obligation to the supplier.
As at 30 June 2020, Company A is involved in a legal dispute with a supplier in relation to the early termination of the exclusive licence agreement between the two entities.
The supplier is seeking damages of $40 million. The directors of COMPANY A believe they will be successful in defending the claim. Company A1s lawyers have advised that it is a 90 percent probability that the entity would not be found liable.
In accordance with /AS 37Provisions, Contingent Liabilities and Contingent Assets, which of the following is the most appropriate option for Company A when preparing its financial report for 30 June 2020?
1) Do nothing.
2) Disclose information about the possible liability as a
3) Recognise a provision for the best estimate of the obligation to the supplier.
4) Recognise a contingent liability for the best estimate of the obligation to the supplier.
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