Pear Ltd has terminated an employee for allegedly breaching company policies on working from home during the COVID-19 pandemic. The employee has subsequently sued the company for unfair dismissal and is claiming for both lost wages as well as emotional distress. The lawyers have advised Pear Ltd that it is likely that they will lose the case and have to pay damages to the employee. However, the lawyers are not able to estimate what the court might decide is the amount due to be paid by Pear Ltd for the emotional distress caused to the employee.

Required:

Should Pear Ltd recognize a liability for this event? Justify your answer by reference to the definition and recognition criteria as per the Conceptual Framework.