Clean Ltd sells stationery and gifts. Due to recent changes in the Australian weather patterns, the shop has flooded twice in the last $5$ years. The company cannot afford the high cost of flood insurance, so the Directors propose to record an amount each year as a liability in the accounts to provide for future expenses related to uninsured flood losses. The Directors propose the following general journal entry:

$Dr$

Flood expenses

$Cr$

Estimated future flood losses payable

Required:

Under the Conceptual Framework, are the Directors able to record the proposed general journal entry for uninsured flood losses? Discuss fully in relation to the definition and recognition criteria for liabilities.