D. After the end of the reporting period, prior to authorising for issue the financial statements for year ended 2017 March 31, the following material information arose:

FPS is being sued by an employee who lost a limb in an accident at work on 2017 March 15. The company is contesting the claim as the employee did not follow safety procedures, as instructed. The financial statements include a note of a contingent liability of $500 000 for personal injury damages. In a recently decided case where a similar injury was sustained. a settlement of $750 000 was awarded by the court. Although this injury is similar, circumstances of the accident in the decided case are different.

State and quantify how the above situation should be treated when finalising the financial statements of FPS Company for year ended 2017 March 31. (6 Marks)