Stag, a public limited company, is preparing its financial statements for the year ending 31 December 2021. The exhibits contain information relevant to the question Exhibit 3 – Provision The following events occurred during the year ended 31 December 2021 In August 2021, Stag relocated to new office premises. The lease on the old premises runs to 31 December 2022 at a rent of £150,000 per year. Stag has been unable to find a tenant to sub-let the old office premises. Stag owns a fleet of motor lorries, a law passed in September 2021 requires safety inspections at a cost of £150,000 by trained inspectors with a good knowledge of the appropriate Driver and Vehicle Standards Agency (DVSA) inspection manuals. This safety inspection needs to be conducted by March 2022. The work has not yet been carried out. Stag is also facing a legal claim for £135 million from a competitor who claims they have breached a patent in one of their processes. Stag has obtained legal advice that the claim has little chance of success and the insurance advisers have indicated that to insure against losing the case would cost £10 million as a premium. question： Using Exhibit 3, as the financial director of Stag, explain how Stag plc should account for each of the activities for the year ended 31 December 2021. You should justify your answers with reference to relevant IFRS Standards.
Stag, a public limited company, is preparing its financial statements for the year ending 31 December 2021. The exhibits contain information relevant to the question Exhibit 3 – Provision The following events occurred during the year ended 31 December 2021 In August 2021, Stag relocated to new office premises. The lease on the old premises runs to 31 December 2022 at a rent of £150,000 per year. Stag has been unable to find a tenant to sub-let the old office premises. Stag owns a fleet of motor lorries, a law passed in September 2021 requires safety inspections at a cost of £150,000 by trained inspectors with a good knowledge of the appropriate Driver and Vehicle Standards Agency (DVSA) inspection manuals. This safety inspection needs to be conducted by March 2022. The work has not yet been carried out. Stag is also facing a legal claim for £135 million from a competitor who claims they have breached a patent in one of their processes. Stag has obtained legal advice that the claim has little chance of success and the insurance advisers have indicated that to insure against losing the case would cost £10 million as a premium. question： Using Exhibit 3, as the financial director of Stag, explain how Stag plc should account for each of the activities for the year ended 31 December 2021. You should justify your answers with reference to relevant IFRS Standards.
Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization
Section: Chapter Questions
Problem 55P
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Stag, a public limited company, is preparing its financial statements for the year ending 31 December 2021. The exhibits contain information relevant to the question
Exhibit 3 – Provision
The following events occurred during the year ended 31 December 2021
- In August 2021, Stag relocated to new office premises. The lease on the old premises runs to 31 December 2022 at a rent of £150,000 per year. Stag has been unable to find a tenant to sub-let the old office premises.
- Stag owns a fleet of motor lorries, a law passed in September 2021 requires safety inspections at a cost of £150,000 by trained inspectors with a good knowledge of the appropriate Driver and Vehicle Standards Agency (DVSA) inspection manuals. This safety inspection needs to be conducted by March 2022. The work has not yet been carried out.
Stag is also facing a legal claim for £135 million from a competitor who claims they have breached a patent in one of their processes. Stag has obtained legal advice that the claim has little chance of success and the insurance advisers have indicated that to insure against losing the case would cost £10 million as a premium.
question：
Using Exhibit 3, as the financial director of Stag, explain how Stag plc should account for each of the activities for the year ended 31 December 2021. You should justify your answers with reference to relevant IFRS Standards.
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