Question

The Tale Newspapers publishes an article in which it is alleged that a prominent politician is having an improper extramarital affair with one of his secretaries. The owner of the company, the Tale Newspapers, is summonsed for alleged defamation amounting to R25 million. The company’s legal advisers assessed the possible outcomes of the case as follows:

Probabilities:

– 15% that the claim will fail;

– 20% that an amount of R5 million will be granted;

– 25% that an amount of R15 million will be granted;

– 20% that an amount of R3 million will be granted;

– 20% that an amount of R2 million will be granted



Required:

Journalise the above information (IAS37 Provisions, Contingent liabilities and Contingent asset applies)


Dr – Provision for legal cost: R25 000 000; Cr – Legal costs: R25 000 000.


Dr – Legal costs: R3 750 000; Provision for legal costs: R3 750 000.


Dr – Provision for legal costs: R15 000 000; Cr – legal costs: R15 000 000.


Dr – Legal costs R5 750 000; Cr – Provision for legal costs: R5 750 000.

Answer 1

[AI-generated answer — Bot GPT 3.5]

Dr – Provision for legal costs: R3 000 000; Cr – Legal costs: R3 000 000.

Dr – Provision for legal costs: R2 000 000; Cr – Legal costs: R2 000 000.