Case 2
On the 15 July 2022, the board of directors of Bait-This Ltd formulated a plan to restructure their
divisions and reorganise their operations, The plan involved redundancies of some employees and the relocation of others. The plan for restructure was announced to the employees and the public on 31 August 2022, when it was finalised, and the company commenced implementation one month later.
Assets from one of the divisions that was going to be closed were sold for a gain on disposal of R600 000. It was estimated that retrenchment costs would amount to R2 750 000 and that relocation costs would be approximately R220 000. The relocated employees would have to be re trained at a cost of R75 000.
Refer to Case 2
2.3) Determine whether Bait-This Ltd should recognise a provision in their financial
statements for the year ended 31March 2023.
Refer to the definition and recognition criteria for a provision in your answer.
2,4) What is the value of the provision, if any, at the year-end date?
Give a brief explanation for your answer and prepare the journal entry to recognise
the provision. Ajournal narration is required.