Legal action has been taken against Ruby Ltd by the municipal council against for polluting the local river. It is very likely that Ruby Ltd will lose the case. However, the lawyers have advised Ruby Ltd that at this time it would not be possible to estimate the total amount of damages to be paid by Ruby Ltd.

Required:

Should Ruby Ltd recognize a liability for this event? Justify your answer by reference to the definition and recognition criteria contained in the Conceptual Framework. (4 Marks)