Candel is being sued by a customer for $2 million for breach of contract over a cancelled order. Candel has obtained legal opinion that there is a 20% chance that Candel will lose the case. Accordingly Candel has provided $400,000 ($2 million × 20%) in respect of the claim. The unrecoverable legal costs of defending the action are estimated at $100,000. These have not been provided for as the case will not go to court until next year. What is the amount of the provision that should be made by Candel in accordance with IAS 37 Provisions, contingent liabilities and contingent assets ?
Candel is being sued by a customer for $2 million for breach of contract over a cancelled order. Candel has obtained legal opinion that there is a 20% chance that Candel will lose the case. Accordingly Candel has provided $400,000 ($2 million × 20%) in respect of the claim. The unrecoverable legal costs of defending the action are estimated at $100,000. These have not been provided for as the case will not go to court until next year. What is the amount of the provision that should be made by Candel in accordance with IAS 37 Provisions, contingent liabilities and contingent assets ?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Candel is being sued by a customer for $2 million for breach of contract over a cancelled order. Candel has
obtained legal opinion that there is a 20% chance that Candel will lose the case. Accordingly Candel has
provided $400,000 ($2 million × 20%) in respect of the claim. The unrecoverable legal costs of defending the
action are estimated at $100,000. These have not been provided for as the case will not go to court until next
year.
What is the amount of the provision that should be made by Candel in accordance with IAS 37 Provisions,
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