QUESTION 5 [20]

The following provisions have been included in the financial statements of Toffee Limitedat 30 June 2020: R

Provision for repair costs for sales under warranty 210 000

Provision for expected operating losses to be incurred in a trade fairscheduled for September 2020 53 000

Provision for severance pay to employees in a discontinued Operation 50 000

Required:

5.1. Distinguish between a provision, liability, and a contingent liability. (8)

5.2. State with reasons, in each of the above 3 cases, whether a provision shall be recognised at 30 June 2020. (12)