QUESTION TWO

$[40]$

Cute Cakes Limited consists of a chain of cake outlets that bakes and sells cakes to the public.

The financial director is finalising the preparation of the financial statements for the year ended $31$ December $2023$ and has identified the following issues for discussion in a meeting with the company's IFRS consultant:

a$)$ Costs of R$50000$ estimated to be incurred for relocating a staff member, A$.$Chef, from the company's head office in Durban to Cape Town to set up shop and manage a new store. The staff member will physically relocate during July $2024.$

b$)$ Long$-$service leave, estimated to be R$150000,$ owing to employees in respect of past services.

c$)$ Provision of R$75000$ for the replacement of a machine. The replacement is required every four years and the machine was four years old as at $31$ December $2023.$

d$)$ Damages awarded against Cute Cakes Limited resulting from a court case decided on $22$ December $2023.$ The judge has announced that the amount of damages will be set at a future date, expected to be in March $2024.$ Cute Cakes Limited has received advice from its lawyers that the amount of the damages could be anything between R$50000$ and R$15$ million.

e$)$ An amount of R$275000$ owing to Sugar works Limited for raw materials provided in December $2023.$

The company's financial statements are authorised for issue on $24$ February $2024.$

Required

Discuss how each of the above issues should be recognised and disclosed in the financial statements of Cute Cakes Limited at $31$ December $2023$ with reference to International Financial Reporting Standards.