Question

Merbau Berhad terlibat dengan beberapa situasi yang berkemungkinan melibatkan luar jangkaan. Setiap situasi diterangkan di bawah. Tahun kewangan Merbau Berhad berakhir 31 Disember 2018. Merbau Berhad is involved with several situations that possibly involve contingencies. Each situation is described below. Merbau Berhad's financial year end is on 31 December 2018 (1) Merbau Berhad adalah plaintif dalam tuntutan ganti rugi RM2,000,000 yang difailkan terhadap Jati Berhad kerana kehilangan keuntungan yang berpunca daripada akaun belum terima yang tidak dibayar. Kes ini berada di tahap rayuan akhir dan penasihat undang-undang menasihatkan bahawa keberangkalian Merbau Berhad akan diberikan ganti rugi sebanyak RM1,500,000. Merbau Berhad is a plaintiff in a RM2,000,000 lawsuit filed against Jati Berhad for damages due to lost profits from unpaid receivables. The case is in the final appeal and legal council advises that it is probable that Merbau Berhad will be awarded RM1,500,000. (2) Pada bulan Februari 2018, Merbau Berhad disaman oleh kerajaan negeri Selangor kerana melanggar undang-undang alam sekitar yang mengawal pembuangan sisa berbahaya. Pada 30 November 2018, Merbau Berhad telah mencapai penyelesaian dengan kerajaan negeri Selangor. Berdasarkan perbincangan dengan penasihat undang-undangnya, Merbau Berhad merasakan keberangkalian kos penyelesaian sebanyak RM5,000,000 akan diperlukan. In February 2018, Merbau Berhad was sued for violations of environmental laws regulating hazardous waste by the Selangor state government. On 30 November 2018, Merbau Berhad reached a settlement with the Selangor state government. Based upon discussions with its legal counsel, Merbau Berhad feels that it is probable that RM5,000,000 will be required to cover the cost of the settlement Dikehendaki/Required: Bagi setiap situasi di atas, tentukan cara pelaporan yang sesuai mengikut MERS 137 - Provisions, Contingent Liabilities and Contingent Assets. Sediakan catatan journal dan pendedahan yang diperlukan. Berikan rasional untuk jawapan anda. For each situation above, determine the appropriate means of reporting in accordance with MFRS 137 - Provisions, Contingent Liabilities and Contingent Assets. Prepare any journal entries and required disclosures necessary. Provide the rationale for your answers.

Answer 1

(1 )A contingent asset is a potential asset that is associated with a potential gain. Because of the concept of conservatism, a contingent asset and gain will not be recorded in a general ledger account or reported on the financial statements until they are certain.A contingent asset becomes a realised asset recordable on the balance sheet when the realisation of cash flows associated with it becomes relatively certain.

Contingent asset: a possible asset that arises from past events, and. whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.

A contingent asset is disclosed, as required by paragraph 89, where an inflow

*of economic benefits is probable.

If an inflow of economic benefits has become probable, an

entity discloses the contingent asset (see paragraph 89).

As it is probable that the company will be able to recover RM1500000. Contingent assets should be created.

Journal entry

Contingent Assets A/c Dr. 1500000

To trade receivables 1500000

(2) Profit and Loss A/c Dr. 5000000

To Legal Expenses 5000000