Kenton Ltd prepares financial statements to 30 April each year. At 30 April 2010, the company is being sued by a customer who claims to have been harmed by one of the company’s products. The case will come before the courts in late 2010. 

Explain how this matter should be dealt with in the financial statements for the year ended 30 April 2010 if: 

(a) the company’s lawyers advise that the company will probably be found liable; 

(b) the company’s lawyers advise that the company will probably not be found liable.