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Elexcars Pty Ltd is a Sydney based electrical car manufacturing company and has large presence in a number of countries. Being the accountant of the company, the owners have sought your advice on the treatment of the following items in the financial statements as at 30 June 2021.
Required:
Discussion 1: Discuss whether the damages should be recognised as a liability in the Statement of Financial Position. Alternatively, what would you recommend to the owners the item be recorded as? Justify your answer with reference to the Conceptual Framework definition and recognition criteria of a liability, and AASB 137 Provisions, Contingent Liabilities, and Contingent Assets.
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