Frest plc (Frest) is a large company manufacturing lifts and providing services around their installation and maintenance. In its financial statements for the fiscal year ended on 31 December 2021, Frest recognised a provision for the following pending lawsuit: At the beginning of 2021, Frest entered into a contract with an operator of several shopping centres. The contract specified that Frest would install lifts in the operator's shopping centres and provide maintenance services for the subsequent three years. Shortly after installation, lifts in one of the shop- ping centres caused a fire on a busy holiday weekend. The operator of the shopping centres sued Frest for negligent conduct during installation and loss of trade on an especially busy weekend. At the end of 2021, the lawsuit was still pending. Frest's lawyers expected Frest to be found liable and to have to pay damages to the operator of the shopping centres with a probability of 65%. They further expected damages to amount to 250,000 with a probability of 30%, 450,000 with a probability of 30% or, in the worst scenario, 750,000 with a probability of 40%. Finally, the lawyers expected the court ruling to take place at the end of 2023. The lawyers' estimates are based on outcomes of several prior lawsuits involving similar accusations as well as parties with similar financial resources. The relevant discount rate for Frest is 8%. REQUIRED: a) Explain why Frest was correct in recognising a provision for the lawsuit. Include in your expla- nation a short discussion of the recognition criteria for provisions under IAS 37. (9 marks) b) Determine the amount of the provision at initial recognition and prepare the journal entry for the initial recognition of the provision in Frest's financial statements for fiscal year 2021. Ex- plain each of your steps. (5 marks) c) Assume that you are supposed to rewrite the above description of the lawsuit so that it results in a contingent liability and not a provision. Propose at least two changes that you would make to the description. Include in your answer explanation of what contingent liabilities are and how they differ from provisions. (7 marks) d) The above description of the lawsuits suggests that the recognition and measurement of pro- visions involves discretion. Identify at least two examples of discretionary decisions from the description of the lawsuit and explain how they can be used to manage earnings