Reference no: EM132543755

Point 1: In a NZ newspaper article entitled "Berry Nasty", there was a report that any people who had eaten a brand of frozen berries should be warned to watch out for symptoms of hepatitis A. This followed at least five cases of people contracting the illness in NZ after eating the frozen mixed berries which had been sourced from China and Chile. In the aftermath of this article, the NZ Company ordered an urgent product recall of its product

Point 2: In relation to the same issue another NZ newspaper article, a week later, discussed the potential financial implications of the product recall. In particular it looked at the likelihood of a class action being taken and the implications of the product recall on the reputation of the NZ Company and its products. Subsequent to the product recall the value of the shares fell by about 12%

Required:

Question 1: In the light of this information described above, do you consider it is appropriate for the NZ Company to utilise a contingent liability note as the means of providing information about their potential liability in relation to the berry claims. Alternatively, are there any grounds to suggest they should recognise a provision in relation to the berry claims?