Trillion Ltd is a highly successful global resources company listed on the Australian Securities Exchange. On 12 July 20X0 Trillion Ltd issued 10 year unsecured notes totaling $150 million. The interest payable on the notes was calculated using a complex formula that linked the rate of interest to fluctuations in commodity prices. At 30 June 20X3 there was a dispute underway that had been initiated by concerned note holders over the amount of interest payable on the notes. Trillion Ltd has strongly defended their calculations of interest payable and do not believe that they are responsible for any additional interest payable on the notes. In order to settle the dispute, the case has been submitted to an Expert Determination Committee in accordance with the provisions of the governing Note Deed. The hearing is expected to take place in late September 20X3. The amount of additional interest and damages that Trillion Ltd would have to pay if they are found responsible for underpaying interest to note holders is estimated to be $5 million.

Required:

Describe the nature of this event and explain how it should be accounted for in the financial statements of Trillion Ltd for the year ended 30 June 20X3. Specify any journal entry(ies) and/or disclosures that may be required.

Answer rating: 100% (QA)

Contingence is a situation where the outcome of even is determined by one or more uncertain future events AS per IAS 37 Provision is liability which i... View the full answer