What is the difference in the recognition and measurement

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ABC Ltd are currently subject to legal proceedings by Canteen, seeking damages as a result of a faulty product sold to them which resulted in an explosion. ABC ltd are disputing liability by claiming that a third party was at fault for incorrectly installing the product for Canteen. Recent correspondence from ABC's lawyers, dated 29 June 2021, has advised ABC that it is probable that they will not be found liable.

In relation to the current court case, the Board are seeking advice on the following:

Problem 1: Based on accounting standards, what is the difference in the recognition, measurement and disclosure requirements for a provision and a contingent liability?

Problem 2: For the current outstanding court case, what should be included in the financial statements? Justify your recommendation and provide specific detail to the Board regarding how this would be captured, including calculations, journals and disclosures as appropriate.

Reference no: EM132986352

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