On $15$ October $2019,$ the board of directors of MAA Bhd decided to close down one of its overseas divisions due to continuous losses. For this reason, a detailed plan was drafted and all costs associated to this closure have been estimated. Besides that, the decision was communicated to all of those affected including notices to the staff of the division. The companys accounting period ends on $31$ December.

Case $2$:

On $20$ November $2019,$ Aqeem Enterprise filed a lawsuit of breach of contract against MAA Bhd for RM$2\mathrm{.}5$ million. Based on the recent evidence obtained by the companys legal advisor, it is believed that the realisation of liability from this claim is reasonably possible. The companys accounting period ends on $31$ December.

REQUIRED:

$($a$)$ Based on the MFRS $137$ Provisions, Contingent Liabilities and Contingent Assets, discuss the appropriate treatment for each of the above cases by MAA Bhd for the year $2019.$

$($b$)$ State THREE $(3)$ situations where contingent liabilities should not be recognised in the financial statements based on Paragraph $13$ of MFRS $137$ Provisions, Contingent Liabilities and Contingent Assets.

Answer rating: 100% (QA)

Accounting Treatment for MAA Bhd under MFRS 137 a Treatment of Each Case Case 1 Closure of Overseas ... View the full answer