Reference no: EM132769687

Fracturedbones Ltd has recently been sued by several customers who have suffered serious injuries as a result of failing to have their injuries properly diagnosed. The claim relates to an MR scanner that Fracturedbones developed for use in their private hospitals. The company guaranteed that the new MRI scanners would be 100% effective in identifying bone related injures However, many customers sustained injuries that were misdiagnosed and required corrective surgery to fix the problems. At 30th June 2020, the court had determined that Fracturedbones Ltd will be liable for damages based on supportive independent medical evidence received following an extensive review by highly qualified orthopaedic surgeons. Had customers received appropriate treatment and diagnosis when first presenting with problems, the on going symptoms and express would have been significantly reduced. As the number of customers affected by the faulty equipment remained unknown at year end, the total amount of damages would be advised on 30th December 2020. However, the solicitor advised Fracturedbones Ltd that the damages are likely to be between $100,000 and $2.5 million.

Required:

Problem 1: With reference to AASB137 Provisions, Contingent Liabilities and Contingent Assets, advise Fracturedbones Ltd how this event should be treated in the financial statements for the year ended 30th June 2020.