At the End of the Financial Period, Rosella Limited Was

question 15

Multiple Choice

At the end of the financial period, Rosella Limited was awaiting the final details of a court case for damages awarded in its favour. The amount and possible receipt of damages is unknown and will not be decided until the court sits again in approximately three months' time. How should Rosella Limited recognise this situation when preparing the financial statements?

• A) Disclose in the notes to the financial statements as it is possible that the entity will receive the damages and the court decision is out of its control.
• B) Do not recognise or disclose in the financial statements as the possibility of receiving damages is remote.
• C) Recognise as an asset in the financial statements as the receipt of damages is probable.
• D) Recognise as a deferred asset in the statement of financial position and re-classify as a non-current asset when the court decision is known.

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Definitions:

Damages

Compensation claimed or awarded in court for a loss or injury.

Firefighters

Individuals trained to extinguish fires, conduct rescue operations, and manage related emergencies.

Scatterplot

A graphical representation of two variable data points which helps in determining the relationship between them.

Correlation

A quantifiable measure that reflects how closely two or more variables are related in terms of their movements.