Venom Limited is a company that handles the collection and disposal of toxic waste. The company's financial year ends on 3 December. On 28 December 2021 one of the company's tankers transporting a load of toxic waste turned over during a storm and split its load. The waste seeped into the ground on the side of the road polluting the area for several hundred meters. There was a public outcry by local residents and concerned environmentalists that the contamination would spread to a nearby river, which was the source of the residents water supply.

Due to immense negative publicity, Venom Limited directors published a statement in the newspaper on 30 December 2021 that the company would remove the contaminated sol and replace it with new soil by 15 February 2022.

The directors are unable to estimate the cost to rehabilitate the contaminated area. This is the first time that this particular chemical has been split and expert environmental consultants are also unable to provide an estimate. A detailed investigation will need to be carried out by the environmental consultants to determine the extent of the damage that has occurred. The investigation is to be carried out during early February 2022. The publication statements is 31 January 2022.

Required:

Discuss how the directors of Venom Limited should recognize and disclose the above situation in the financial statements for the year ended 31 December 2021 in accordance with IAS37 Provisions, Contingent Liabilities and Contingent Assets.

[15] marks