Brora plc has prepared draft financial statements for the year ended 30 September 1997 and the Board of Directors has asked you, the group's financial accountant, to provide guidance on the following outstanding matters:

(1) The company borrowed \(£ 3\) million from an associated company on 29 September 1997. It is anticipated that the company will repay this shortly after the year end. The directors of Brora plc have informed you that this cash was borrowed to improve the apparent liquidity of the group at the year end.

(2) A fire in one of tile company's warehouses on 5 October 1997 has reduced stock with a cost of \(£ 1.5\) million to a net realisable value of \(£ 1\) million. The company has a policy of selfinsurance and does not hold any insurance cover.

(3) An overseas subsidiary, with net assets of \(£ 750000\), has been nationalised by its local government on 10 October 1997. There has been no offer of compensation from the overseas government.

(4) The company is facing litigation for damages from a customer for the supply of faulty goods and consequent losses from the subsequent manufacturing process. The claim is for \(£ 1.4\) million and was received on 1 October 1997. The directors, after consulting with legal and technical advisers, consider that a claim against Brora plc's suppliers is appropriate to reflect their contribution to the difficulties encountered by the company's customer and, accordingly, a claim of \(£ 1.2\) million was sent to the suppliers on 9 October 1997.

\section*{Requirement}

Advise the board of directors of Brora plc on the appropriate accounting treatment and disclosure for the above items in the financial statements for the year ended 30 September 1997, referring to appropriate accounting standards and legislation.