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An employee was injured while working. He took legal action and sought damages of RM2.7 million. The entity has taken legal advice and is confident the entity will be held liable but the amount payable is questionable.
Problem 1: Which would be the most suitable accounting and disclosure of the above case.
a. It is a contingent liability and so only disclosure will need to be made.b. Ignore it till the outcome is known.c. It is probable that there will be an outflow of economic benefits, make a provision for RM2.7 million.d. It is probable that there will be an outflow of economic benefits, make a provision to the best estimate.
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