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On 16 June 2020, an aircraft of Sukoon Airlines Limited (SAL) made an emergency landing near a factory building. Though all persons on board were safe, the nearby factory was damaged. As a result, two factory workers lost their lives and five workers were injured. After one week of this accident, SAL's CEO informed in a press conference that SAL will pay Rs. 1.5 million for each loss of life and Rs. 1 million for each injured worker.
On 8 July 2020, the factory owner filed a claim of Rs. 25 million for factory damages. The case is still pending; however, SAL's legal advisor is of the view that there is 70% probability that the amount of damages would be Rs. 20 million and 30% probability that the amount would be Rs. 15 million.
Due to this accident, the aircraft was damaged beyond repairs and consequently SAL cannot use this aircraft anymore. The aircraft was acquired on lease on monthly rental of USD 0.5 million for 10 months expiring on 31 October 2020. As per lease agreement, if aircraft faces any accident, SAL is required to pay monthly rentals to the lessor till settlement of insurance claim. The insurance claim was settled on 31 August 2020.
Required:
Problem 1: In the context of relevant IFRSs, discuss how the above issues should be dealt with in the financial statements of SAL for the year ended 30 June 2020.
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