A client filed a lawsuit against Rattata Ltd in November 2022 for negligence when providing its services.
Question:
A client filed a lawsuit against Rattata Ltd in November 2022 for negligence when providing its services. The amount claimed was \($13\) million. Rattata Ltd’s lawyers have advised that the amount claimed is extortionate and that Rattata Ltd has a good chance of winning the case. However, the company’s lawyers have also advised that expected costs and damages would be about \($2\) million in the event that Rattata Ltd is unsuccessful in defending the case.
Required
How should Rattata Ltd record and disclose this event in its financial statements as at 30 June 2023?
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Rattata Ltd has no present obligation to pay the amount claimed by the client filed over the lawsuit ...View the full answer
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