Grey Limited Case Study - Accounting and Finance Assignment Help

Assignment Task:

QUESTION: 

Grey Limited is a bus-line that has a network of routes linking major cities around South Africa. They operate a fleet of buses which transport passengers throughout the year. On 24 December 2018 one of these buses had crashed into a tree while on the route between Johannesburg and Durban. Many of the passengers on-board were Injured. Grey Limited's year-end is 31 December. and its financial statements are authorized for issue on 15 February each year. 

Part A 

• South African traffic law requires companies that provide transport facilities to compensate any passengers injured while using the service. 
• Grey Limited's lawyers have estimated that the company will be obliged to pay R2000 000 in compensation under the relevant statute. but the amount will only be confirmed when the company receives notice from the National Traffic Agency in March 2019. 

Part B 

• There is no law requiring Grey Limited to pay compensation. but It is common practice In the public transport industry for companies to compensate passengers who are injured while using their service. 
• A typical pay-out for a similar accident is R2000 000 compensation to the affected passengers. 

Part C 

• There is no law or common industry practice which might require Grey Limited to pay compensation to the injured passengers. Media reports have. however, led to the public interest in the accident and many groups have expressed outrage at Grey Limited's lack of Christmas spirit Is not assisting its customers. 
• As a result, the managing director of Grey Limited made a public announcement on 15 January 2019. in which he stated that the company would pay compensation to those affected by the accident. The company's accountants have estimated that such compensation payments will cost the company P2000 000.

 
Required:
For each scenario. discuss whether a provision should be recognized in respect of the compensation in the financial statements of Grey Limited for the year ended 31 December 2018, in accordance with International Financial Reporting Standards. 

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