ABC Ltd. is a dynamic company engaged in strategic acquisitions to expand its business portfolio. As part of its growth strategy, the company has…

ABC Ltd. is a dynamic company engaged in strategic acquisitions to expand its business portfolio. As part of its growth strategy, the company has recently acquired PQR Ltd. and RST Ltd. While these acquisitions present growth opportunities, these acquisitions also include ongoing lawsuits against the acquired companies. However, ABC Ltd. has secured indemnities from the respective sellers to mitigate potential financial risks associated with these legal matters. Following acquisitions took place during the year (i) ABC Ltd. acquired a beverage company PQR Ltd. from XYZ Ltd. At the time of acquisition, PQR Ltd. is the defendant in a court case whereby certain customers of PQR Ltd. have alleged that products of PQR Ltd. contain pesticides in excess of the permissible levels, which have caused them health damage. PQR Ltd. is being sued for damages of 2 crores. XYZ Ltd. has indemnified ABC Ltd. for the losses, if any, due to the case for amount up to 1 crore. The fair value of the contingent liability for the court case is 0.70 crore. (ii) ABC Ltd. pays 50 crores to acquire RST Ltd. from MN Ltd. RST Ltd. manufactured products containing fiber glass and has been named in 10 class actions concerning the effects of these fiber glass. MN Ltd. agrees to indemnify ABC Ltd. for the adverse results of any court cases up to an amount of 10 crores. The class actions have not specified amounts of damages and past experience suggests that claims may be up to 1 crore each, but that they are often settled for small amounts. ABC Ltd. makes an assessment of the court cases and decides that due to the potential variance in outcomes, the contingent liability cannot be measured reliably and accordingly no amount is recognised in respect of the court cases. On the basis of the facts given above, chose the most appropriate answer to Questions 1 to 5 below based on the relevant Indian Accounting Standards (Ind AS).