A company is being sued by a customer in respect of some products supplied which thecustomer claims are faulty. The customer is suing for GH¢220,000 plus damage. Courtcosts are likely to amount to GH¢40,000. The company's lawyer has advised that there isan 80% chance that the case will be lost and that the full amount claimed by the customerwill become payable against the company.The company is fully insured and the lawyer has advised that the insurance policy coversthe event and should be utilized.
Required:

Determine the amount that should be recognized as a provision and charged to profit or loss  and determine the treatment of the insurance claim

Answer rating: 100% (QA)

The definition of a provision is key to the standard A provision is a liability of uncertain timing or amount meaning that there is some question over either how much will be paid or when this will be ... View the full answer