Verge, a public limited company, operates local and inter-city trains. In February 20X2, an inter-city train did what appeared to be superficial damage to a storage facility of a local company. The directors of the company expressed an intention to sue Verge but in the absence of legal proceedings, Verge had not recognized a provision in its financial statements to 31 March 20X2. In July 20X2, Verge received notification for damages of $1.2m, which was based upon the estimated cost to repair the building. The local company claimed the building was much more than a storage facility as it was a valuable piece of architecture, which had been damaged to a greater extent than was originally thought. The head of legal services advised Verge that the company was clearly negligent, but the view obtained from an expert was that the value of the building was $800,000. Verge had an insurance policy that would cover the first $200,000 of such claims. After the financial statements for the year ended 31 March 20X3 were authorized, the case came to court and the judge determined that the storage facility actually was a valuable piece of architecture. The court ruled that Verge was negligent and awarded $300,000 for the damage to the fabric of the facility.

Required: 

Advise Verge on how the above accounting issue should be dealt with in its financial statements for the years ending 31 March 20X2 (where applicable) and 31 March 20X3.