The company Mlmblendiverksmijan hf. was informed in January 2020 that the Ministry of the Environment has begun

The company Málmblendiverksmiðjan hf. was informed in January 2020 that the Ministry of the Environment has begun an investigation into possible environmental damage due to the company's operations. The investigation aims to assess the extent of possible environmental damage due to an accident that occurred in the company's factory in the middle of 2020 and also to demand the company for improvements due to the accident, damages due to environmental damage and fines for violations of the company's operating license.

What rules apply to the recognition of liabilities or contingent liabilities in the financial statements? Let us assume that Málmblendiverksmiðjan cannot estimate the amount of costs that are likely to be incurred by the company due to the accident, but can instead estimate the possible minimum and possible maximum of the costs that are likely to be incurred by the company. What information should the company present in the annual accounts and in what way? If it is not possible to estimate the possible amounts due to the accident, how should information about this event be presented in the annual accounts?

Answer rating: 100% (QA)

Contingent liabilities are potential obligations whose existence will be confirmed by unforeseeable ... View the full answer