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Problem - After a wedding in 2018 ten people died, possibly as a result of food poisoning from products sold by Callow Co. Legal proceedings are started seeking damages from Callow but it disputes liability. Up to the date of approval of the financial statements for the year to 31 December 2018, Callow's lawyers advise that it is probable that it will not be found liable. However, when Callow prepares the financial statements for the year to 31 December 2019 its lawyers advice that, owing to developments in the case, it is probable that it will be found liable.
What is the required accounting treatment? (a) At 31 December 2018? (b) At 31 December 2019?
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