Reference no: EM132672792

Vinty Bhd. (Vinty) is a company involved in manufacturing biscuits. The following events had occurred during the year ended 31 August 2019.

(a) Vinty is currently expanding its business globally. In June 2019, the factory operations in a foreign country have seriously polluted the environment and the probable clean-up costs has been estimated at RM7 million. Though there is no environmental laws in the foreign country, the company has always been a socially and environmentally responsible corporate citizen.

(b) Vinty's board of directors has decided to restructure the company in one year's time due to adverse economic conditions. The restructuring involves closing its branch in Penang. Due to this, 35% of the staff will be made redundant. Vinty has not come up with the decision as to which employees will be affected and has yet to make an announcement that it is going to restructure.

(c) One of the flour suppliers, MCG Bhd. (MCG) had attracted adverse publicity due to the issue of cleanliness of its factory. Therefore, on 1 July 2019, Vinty had decided to terminate the contract with MCG. The contract will be expiring in 10 months' time. According to the contract, the cost to fulfill the contract is RM5,000 per month. It is also stipulated in the contract that MCG can accept a compensation of RM60,000 if the contract is terminated more than 6 months before it expires.

Problem 1: In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, discuss whether provisions should be recognised for each of the above events.