Study the scenario below and answer the question that follow: Avon Motors It is required by law in Witzenberg to shovel snow and ice from footpaths at shop entrances. Avon Motors failed to do so, and a pedestrian, Cathy Holmes, slipped and fell, resulting in a serious and costly injury. Cathy Holmes subsequently sued Avon Motors. The company's lawyers indicated that while they will vigorously defend Avon Motors in the lawsuit, the company should expect to lose R520 000 to cover Cathy's hospitalisation and other incident-related costs. A court decision, however, is not expected for at least a year.

Required: By referring to aspects of the Conceptual Framework only, substantiate, in detail, the appropriate accounting treatment for this situation.