Accounting · Provisions and Contingencies

Phoenix Co. is facing several legal and operational uncertainties as at 31 May 20X5: A. A customer filed a lawsuit on 1 May 20X5 for a defective product sold on 1 April 20X5. Legal counsel advises that it is probable (70% chance) Phoenix Co. will lose the case and be required to pay damages of $50,000. B. Phoenix Co. is currently negotiating to acquire a new supplier; discussions began on 1 June 20X5, after the year-end. C. On 10 June 20X5 (after the year-end), a fire destroyed an uninsured portion of Phoenix Co.'s raw material inventory, which is significant. D. The company issued a public statement on 15 May 20X5 announcing a voluntary recall of a specific furniture line due to a minor aesthetic flaw. While not legally required, the company has a well-established history of conducting such recalls to maintain brand reputation. The estimated cost of the recall is $20,000, and it is probable that customers will respond. Which of the situations would require Phoenix Co. to recognise a provision in its financial statements in accordance with IAS 37?