Page 27 - CIMA MCS Workbook November 2018 - Day 2 Tasks

ADVANCED FINANCIAL REPORTING (F2) ‐ PRACTICE TASKS

TASK 3 – CLAIM

Trigger and task
E‐mail

From: Yulia Pushkin (Human Resources Manager)

To: Finance Manager

Subject: Possible claim for compensation

Earlier this week, I received notification of a compensation claim from a solicitor representing one
of our employees who claims that he was injured as a result of using faulty plant and equipment.
This employee is currently on sick leave. Fortunately, his injuries are relatively minor. His solicitor
states that the employee was wearing the relevant protective clothing and was operating the
machine in accordance with Grapple procedures.

As a result of receiving this communication, I have discussed the issue with Matthew Jones, the
Production Director, and he has investigated the operation of the relevant machine. Matthew has
now made a preliminary review of the machine and he confirms that the machine is not
functioning as it should. He has made it his priority to have the machine repaired and will ensure
that the machine is overhauled and safe to use before it is reintroduced into the production
process.

Matthew has also identified that, as the machine was not functioning properly, there was leakage
of lubricant which found its way into the normal wastewater and drainage system (not water used
for our products). Given the very low quantity of escaped fluid, it is highly unlikely that there
would be any significant or permanent environmental consequences of this leakage, but it should
not have occurred and it does breach environmental law.

Grapple goes to considerable lengths to ensure that it complies with all legal requirements
relating to the production of its soft drinks. including training of employees, having adequate
insurance cover, ensuring that all plant and equipment is in sound working order and that they
meet current legal requirements.

As I received notification of the compensation claim, Roger Grapple asked me to look into possible
reasons for inclusion of provisions and other related items in Grapple’s financial statements as a
result of this reported accident. To save me some time before the directors’ board meeting next
week, please summarise the requirements of IAS 37 Provisions, Contingent Liabilities and
Contingent Assets and apply those requirements to the consequences of this incident.

Please provide this information to me by the end of this week so that I can report to Roger next
week.

Prepare a response to Yulia’s email. (45 minutes)

KAPLAN PUBLISHING 47