Consider the following situations:

Situation 3: During the current year, 10 employees died after a plant explosion, possibly as a result of lack of equipment maintenance or safety procedures at the plant by the enterprise. Legal proceedings have been started seeking damages from the enterprise but it disputesliability. Up to the balance sheet date, the enterprise's lawyers have advised that it isprobable that the enterprise would be found liable. But they have also advised that it is almost impossible to estimate the amount of damages the court might award against the company or how long it might take to exhaust all the legal avenues before a final court decision is reached in this case.

REQUIRED:

Explain whether a provision should be recognised, a contingent liability should be disclosed or nothing should be accounted for. Also, you are required to show journal entries where a provision is required, or to prepare note to the financial statements for disclosure.