Fresh Limited, a manufacturer of toothpaste, was taken to court over alleged defamation charges when the...
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Fresh Limited, a manufacturer of toothpaste, was taken to court over alleged defamation charges when the company accused a rival toothpaste manufacturer of fraud. Before year end (31 December 2018), the lawyer of Fresh Limited advised that, although losing the case was unlikely, legal fees and settlement costs could amount to R900 000 in the event that the court case was lost. On 04 February 2019, the judge presiding over the case ruled that Fresh should pay R1 000 000 to the plaintiff as well as pay all of the plaintiff's legal fees, which amounted to R180 000. The financial statements had not yet been authorised for issue at the time of the court ruling. Required: Discuss how this information should be treated in the financial statements of Fresh Limited for the year ended 31 December 2018. Fresh Limited, a manufacturer of toothpaste, was taken to court over alleged defamation charges when the company accused a rival toothpaste manufacturer of fraud. Before year end (31 December 2018), the lawyer of Fresh Limited advised that, although losing the case was unlikely, legal fees and settlement costs could amount to R900 000 in the event that the court case was lost. On 04 February 2019, the judge presiding over the case ruled that Fresh should pay R1 000 000 to the plaintiff as well as pay all of the plaintiff's legal fees, which amounted to R180 000. The financial statements had not yet been authorised for issue at the time of the court ruling. Required: Discuss how this information should be treated in the financial statements of Fresh Limited for the year ended 31 December 2018.
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Answer rating: 100% (QA)
Solution Creation of contingent liability Given that as per Lawyers estimates the chances of losing the care are unlikely ie chances of wining the cas... View the full answer
Related Book For
Intermediate Accounting Volume 1
ISBN: 978-1119496496
12th Canadian edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy
Posted Date:
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