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    Question

    A company faces a lawsuit for patent infringement. Legal

    advisors state a 55% probability of losing with damages of ₹50 crore, but range could be ₹40–₹70 crore. Settlement discussions ongoing. How should the company account at year-end?
    A Disclose only, no provision because outcome uncertain. Correct Answer Incorrect Answer
    B Provide ₹55 crore (probability-weighted). Correct Answer Incorrect Answer
    C Provide best estimate within range (most likely amount or midpoint if no better estimate). Correct Answer Incorrect Answer
    D Provide full ₹70 crore as prudent. Correct Answer Incorrect Answer
    E Provide nothing until settlement concludes. Correct Answer Incorrect Answer

    Solution

    Ind AS 37: provision required if obligation probable (>50%). Best estimate = most likely outcome; if no single most likely, use midpoint of range. Hence provision, not just disclosure.

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