QUESTION THREE [20] Kaas Limited purchased 1 000 litres of unpasteurised milk on 1 October 2022 for R50 000, half of which had been used in the production of long-life milk during October 2022 and sold to supermarkets between October and November of 2022. The remaining 500 litres was frozen for future use. On 1 December 2022, a consumer suffered serious food poisoning and alleged that it was caused by the long-life milk produced by Kaas Limited. This consumer took legal action against Kass over the poisoning. Kaas Limited is not insured against the potential losses that may result from claims of this nature. Due to public interest, the case went to court almost immediately. Indications during the court proceedings, held in late December 2022 were that Kaas Limited was probably responsible for was found that the long-life milk was poisoned poisoning and would probably be found guilty.

because the mik used in its manufacture had been contaminated. At 31 December 2022 it was too soon to be able to reliably estimate the settlement costs. Due to the negative publicity arising from the court case, Kaas Limited decided not to plead against the inevitable 'guilty' verdict and to willingly pay all costs, in the interests of salvaging a positive public image. The financial director is finalising the financial statements for the year ended 31 December 2022 and the board plan to authorise the financial statements for issue by mid-February 2023 . The following events relating to the case are relevant and need to be considered: a) Warnings by the lawyers: Kaas Limited has been unable to keep the case out of the media and their lawyers wamed in December 2022 that as soon as the verdict was published in the media, more similar cases will probably be brought against Kaas Limited by other aggrieved customers, although it was impossible to estimate the number of cases or their financial impact. b) Estimated settlement costs: b) Estimated settlement costs: During January 2023, Kaas Limited's lawyers obtained further information that enabled them to estimate that the court would award the plaintiff R250 000 whereas an out-of-court settlement would probably be R220 000 . c) Findings of specialists: Specialists hired by Kaas Limited in January 2023, but before publishing the financial statements, confirmed that all of the 500 litres of unpasteurised milk held in cold storage at year-end is also contaminated and must be destroyed. d) Possible returns: By the time the financial statements were authorised for issue on 15 February 2023 , no further containers of long-life milk had been returned. It seems that there is only a remote chance that there would be any returns at this late stage. Required: All amounts are material but none of the issues mentioned above have caused there to be a going concern problem. Required: All amounts are material but none of the issues mentioned above have caused there to be a going concern problem. 3 Discuss, how, if at all, the events described in (a) to (d) above should be recognised, measured and disclosed in the financial statements of Kaas Limited for the year ended 31 December 2022 with reference to International Financial Reporting Standards. See mark allocation per issue below. Your answer should include relevant definitions from IAS 10 Events after the Reporting Period and 37 Provisions, Contingent Liabilities and Contingent Assets. Ignore taxation