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Identify whether the following should be Recognised, Disclosed or Ignored when Daleside Co is preparing the financial statements for the year ended 31 December 20X9. Assume that all amounts are material.
1/Daleside Co has heard that a former employee intends to sue for constructive dismissal. She left the company in November 20X9.
2/Daleside Co has commenced legal proceedings against a supplier for breach of contract. Advisers suggest a 85% likelihood that Daleside Co will win the case.
3/Daleside Co will close one of its operating divisions in February 20X9 incurring redundancy costs. The closure has been widely reported in the press.
4/As a result of an economic downturn, Daleside expects to make a loss in the first half of 20X9
5/Daleside Co has made a provision for a case brought against it by a customer. If this results in payment to the customer, it is virtually certain that an amount will be recoverable from Daleside Co's insurers

Sagot :

During the preparation of the financial statements for the year ended 31 December 20X9, the materials they should be recognised, disclosed or ignored are explained below:

1. In this case, Daleside Co. should recognize the former employee for constructive dismissal in the period of November 20X9.

2. Since there is a 85% likelihood that Daleside Co will win the case, then Daleside Co should recognize legal proceedings against the supplier for breach of contract.

3. Daleside Co will disclose the redundancy cost in this case. The company has closed one of its operating divisions in February 20X9 and it has been widely reported in the press.

4. Daleside should ignore the losses since there's an economic downturn and it's normal for such to occur.

5. Since Daleside Co has made a provision for a case that was brought against it by a customer, then it should be recognized.

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