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Justify the required accounting treatment of these issues

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Reference no: EM132974386

Question - Oxford Plc is a UK listed group that prepares consolidated financial statements using international financial reporting standards (IFRS). In July 2020 Oxford plc supplied a single, unique product to a company. The product was faulty and in February 2021 the customer initiated proceedings against Oxford plc for losses incurred. A specialist consultant has advised Oxford plc that there is a case to answer. He has estimated that there is a 30% chance of damages amounting to £2 million, a 60% chance of damages amounting to £5 million and a 10% chance of damages amounting to £30 million. No provision has been made. The audit committee believes that Oxford Plc may have insufficient funds to settle damages amounting to £30 million. The year end for Oxford Plc is 31 December 2020.

Explain and justify the required accounting treatment of these issues, preparing calculations where appropriate and showing the presentation requirements.

Reference no: EM132974386

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