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an employee filed a claim against TT on 12 march 2009 for R250000 for injuries sustained whilst on duty. the injuries were sustained on 24 February 2009. the lawyers of TT are of the opinion that the employee is entitled to compensation, but that the compensation must be claimed from the compensation fund ( in terms of the compensation for occupational injuries and diseases act ) and not from TT. the compensation fund is administered by the department of labour.
the shareholder of TT agree with this opinion but have guaranteed that, should TT become liable for this claim in the future, they will reimburse TT for 75% of the actual payment. the fair value of TT’s potential liability to the employee is R180000 on 1 March 2009. any amount that TT may be required to pay would not be tax deductible.
on 28 February 2010, the claim was submitted to the compensation fund. the fair value of the potential liability was R80000 on that date. the compensation fund settled the claim of the employee in full on 14 December 2010. acquisition date is 1 March 2009. prepare a pro forma journal entry
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