Question 2 Surf's SUP Ltd sell stand-up paddleboards. They pride themselves on offering quality products and offer a 3 year warranty on all of their paddleboards If minor defects occurred in all products sold, repair costs would be $2m. If major defects occurred, repair costs would be $6m. Based on the entity's past experience and future expectations, they estimate that 15% of boards will present with minor defects over the warranty period, and only 3% with major defects It is expected that one third of the warranty claims (major and minor) ill happen at the end of the first year, another third at the end of the second year, and another third at the end of the third year. The pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability is 8% Surfs SUP Ltd ask for your advice as to whether they should establish a provision for their expected warranty claims, and what the appropriate accounting treatment would be Required a) Advise Surf's SUP Ltd (max. 250 words) on whether they need to create a warranty provision and why. Refer to the Accounting Standards in your answer 10 marks