QUESTION 5 (15 Marks)

a) Discuss the requirements for recognition, measurement and disclosure in the reporting entitys financial statements based on MFRS 137 Provisions, Contingent Liabilities and Contingent Assets. (5 Marks)

b) Murni Berhad has two outstanding issues in its company. The first is an outstanding court case concerning a customer claiming damages for losses due to faulty components supplied by Murni. The estimated outcomes of a court case are 15% chance of no damages awarded, 60% chance of damages of RM2 million and 25% chance of damages of RM5 million. The second is the provision required for product warranty claims against 300,000 units of retail goods supplied with a one-year warranty. The estimated outcomes of warranty claims are 80% of sales will have no claim, 15% of sales will require a RM30 repair and 5% of sales will require a RM110 repair.

Required:

Advise Murni Berhad on the amounts of provisions that should be recognized. (6 Marks)

c) The following events are related to Sun Berhad.

1. Suns production plant in Sarawak has a carrying value of RM20 million on the statement of financial position date. On 3 March 2020, a valuator has done revaluation of the plant and informs them that the valuation is in excess of RM6 million.

2. On 10 January 2020, the directors of Sun decided to cease production to one of its four product lines and the production facility.

The statutory audit of the company for the financial year-end is 31 December 2019 was completed on 28 February 2020. The financial statements were signed by the board of directors on 10 March 2020 and approved by the shareholders on 5 April 2020.

Required:

For each event, discuss the proper accounting treatment based on the requirements of MFRS 110: Events after Reporting Period. (4 Marks)