Kiara Ltd has shared a list of ongoing court cases, with their
attorney confirming the company’s liability for all damages awarded
to claimants for the financial year ending 31 March 2025. These
liabilities may significantly affect the company’s financial
statements and future cash flow.
• In the financial year ending 31 March 2024, Kiara Ltd was
involved in litigation following a lawsuit filed by a claimant for
physical injuries sustained on the company’s premises. The
case was resolved in June 2024, with a settlement totalling
R1 550 000. This amount was duly recognized in the
financial statements for the year ended 31 March 2024.
• Continuing from the 2024 financial year, Kiara Ltd is dealing
with an ongoing claim of R95 000 related to alleged
negligence by its production team. The claim stems from
medical issues reported by two individuals after using
products manufactured and sold by the company. The
matter remains unresolved and is currently under legal
review.
• A claim of R1 800 000 has been lodged against Kiara Ltd
during August 2024, alleging the unlawful use of marketing
strategies and slogans originally developed by a competitor.
• Ajan Ltd has filed a claim of R3 000 000 against Kiara Ltd
for damages allegedly caused by the company's products.
The claim arises from health issues experienced by
personnel involved in the manufacturing process, who were
directly exposed to toxins released from the purchased
materials.
These amounts were subsequently recorded as provisions in Kiara
Ltd's financial statements at year-end. SARS has denied any
income tax deduction for the damages related to the unlawful use
of the competitor's marketing material. However, the damages
claimed in connection with the products will qualify as taxdeductible
expenses. The applicable corporate tax rate remains at
27%.
Required:
Use the balance sheet method to calculate the deferred tax
balance of Kiara Ltd for the financial year ended 31 March 2025.