the customer. As the short circuit was very likely due to a manufacturing defect, TPPL also made a corresponding claim against the manufacturer of the digital watch for $8,000. The company's lawyer believed that there would be a 70% chance that the counter claim against the manufacturer was likely to succeed. Explain and discuss how TPPL should treat these two legal claims in its financial statements for the year ended 31 December 20X1
A digital watch bought from TPPL had a short circuit while the customer was doing work under the sun. This resulted in minor burns and injury to the customer's wrist. The customer sued the company for $10,000 as compensation. As at 31 December 20X1, TPPL's lawyer believed that it would be more than likely that the company would lose the court case against the customer. As the short circuit was very likely due to a manufacturing defect, TPPL also made a corresponding claim against the manufacturer of the digital watch for $8,000. The company's lawyer believed that there would be a 70% chance that the counter claim against the manufacturer was likely to succeed. Explain and discuss how TPPL should treat these two legal claims in its financial statements for the year ended 31 December 20X1 under the applicable SFRSs.
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