Reference no: EM132642254
Question - In March, 2017, while the mine was being set up, the owner of a neighbouring farm filed a lawsuit claiming damages for losses suffered due to the company's ongoing operations. He claimed that his annual crop could not be harvested as it was damaged by the very high level of pollution of dust and chemical particles. Further, he claimed a loss due to a significant number of his cattle herd dying due to the drinking of water polluted by the chemicals released in the adjoining river. He also claimed that the company's operations caused severe illness to himself and his family, leading to a loss of his livelihood and irreparable damage to the value of his farming property. DCI attorneys assessed the likelihood of losing the lawsuit as reasonably possible at 60%, with the range of awarded damages between $675,000 and $ 1,025,000. The company further estimated possible amounts of losses with corresponding probabilities of occurrence as follows: $675,000 (62%), $ 800,000 (24%), $ 900,000 (10%), and $1,025,000 (4%).
Required -
1. How would any possible loss be treated (determining loss numbers, and provide adequate reasons and the journal entry, if necessary) under IFRS requirements?
2. Now assume that the attorneys state that the company is likely to lose the lawsuit. Similarly, how would any possible loss be treated (determining loss numbers, and provide adequate reasons and the journal entry, if necessary) under ASPE requirements?
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