You are the accountant for Time Pieces Pte Ltd (TPPL) and are finalising the accounts for the financial year ending 31 December 20X1. TPPL is a company incorporated in Singapore and adopts the SFRSs. The following information are for your consideration: Required:

(a) TPPL sold 3,000 watches and provided a years warranty for all its watches sold during the financial year ending 31 December 20X1. From past experiences, 3% of the watches would be returned for minor repairs and 1% would need to be replaced. TPPL estimated that the average minor repair costs per watch was about $4 and the average replacement costs per watch was about $100. Explain and discuss how TPPL should treat these estimates in its financial statements for the year ended 31 December 20X1 under the applicable SFRSs. (8 marks)

(b) A digital watch bought from TPPL had a short circuit while the customer was doing work under the sun. This resulted in minor burns and injury to the customers wrist. The customer sued the company for $10,000 as compensation. As at 31 December 20X1, TPPLs lawyer believed that it would be more than likely that the company would lose the court case against the customer. As the short circuit was very likely due to a manufacturing defect, TPPL also made a corresponding claim against the manufacturer of the digital watch for $8,000. The companys lawyer believed that there would be a 70% chance that the counter claim against the manufacturer was likely to succeed. Explain and discuss how TPPL should treat these two legal claims in its financial statements for the year ended 31 December 20X1 under the applicable SFRSs. (12 marks)

(c) TPPL had finalised its accounts for the year ending 31 December 20X1. The date of authorization of financial statements for issue was 22 March 20X2. Before the financial statements were issued, the following information came to your attention, i.e. TPPLs usual practice was to offer one-year warranty on all the watches sold by the company. In order to provide better customer service, the board of directors decided during a board meeting in December 20X1 to give a two-year warranty for all watches sold, including those sold before 20X1. The policy of the two-year warranty was announced in the middle of January 20X2 through a promotional campaign and the terms and conditions were made available on the companys website. Explain and discuss how TPPL should treat this scenario in its financial statements for the year ended 31 December 20X1 under the applicable SFRSs. (8 marks)