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Limau Bhd has a financial year ending 31 December. Required: Advise Limau Bhd, in accordance to MFRS 137 Provisions, Contingent Liabilities and Contingent Assets, how
Limau Bhd has a financial year ending 31 December. Required: Advise Limau Bhd, in accordance to MFRS 137 Provisions, Contingent Liabilities and Contingent Assets, how the following situations should be accounted for as at 31 December 2020. (a) During the financial year 2020, Limau Bhd sued its main supplier for RM1.5 million damages for faulty supply of materials which had affected its production. As at reporting date, the legal advice is that it is probably that Limau Bhd will win the case. (5 marks) (b) Limau Bhd operates a factory in a foreign country where there is no environmental legislation requiring entities to provide for the cost of environmental clean-up. In 2020, the factory operations caused a serious threat to the ecosystem of a nearby river and the probably clean-up cost was estimated to be RM10 million. Limau Bhd was publicly acclaimed acclaimed as a socially and environmentally responsible corporate citizen
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