COPYRIGHT 2010 BY Mohammad Faizan Farooq

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IAS 10 EVENTS AFTER REPORTING PERIOD

Event after the reporting period: An event, which could be favourable or unfavourable, that occurs between the end of the reporting period and the date that the financial statements are authorised for issue. Adjusting event: An event after the reporting period that provides further evidence of conditions that existed at the end of the reporting period, including an event that indicates that the going concern assumption in relation to the whole or part of the enterprise is not appropriate. Non-adjusting event: An event after the reporting period that is indicative of a condition that arose after the end of the reporting period. Accounting Adjust financial statements for adjusting events events after the balance sheet date that provide further evidence of conditions that existed at the end of the reporting period, including events that indicate that the going concern assumption in relation to the whole or part of the enterprise is not appropriate.

Do not adjust for non-adjusting events events or conditions that arose after the end of the reporting period. If an entity declares dividends after the reporting period, the entity shall not recognise those dividends as a liability at the end of the reporting period. That is a non-adjusting event.

Going Concern Issues Arising After End of the Reporting Period An entity shall not prepare its financial statements on a going concern basis if management determines after the end of the reporting period either that it intends to liquidate the entity or to cease trading, or that it has no realistic alternative but to do so. QUESTION FFQA1 Should details of material adjusting or material non-adjusting events after the balance sheet date be disclosed in the notes to financial statements according to IAS 10 Events After the Balance Sheet Date? A Adjusting events B Non-Adjusting events QUESTION FFQA2 1 Merger with another company. 2 Insolvency of a customer. 3 Destruction of a major non-current asset. 5 Discovery of fraud. 4 Sale of inventory held at the balance sheet date for less than cost. Which three of the listed items are, according to IAS 10, normally to be classified as adjusting? A 1, 2 and 3 B 2, 4 and 5 C 1, 2 and 5 D 1, 4 and 5

Prepared by: Mohammad Faizan Farooq Qadri Attari ACCA (Finalist)

http://www.ffqacca.co.cc

Contact: faizanacca@yahoo.com

COPYRIGHT 2010 BY Mohammad Faizan Farooq Page # 2 QUESTION FFQA3 The directors of a company are considering the companys draft financial statements for the year ended 30 September 2002. The following material points are unresolved: 1. One of the companys buildings was destroyed in a flood in October 2002. The estimated value of the building was $4m, but it was insured for only $3m. The companys going concern status is not jeopardised. The directors are unsure what adjustment or disclosure, if any, should be made. (2 marks) A 2. Some goods which had cost $120,000, and which were included in closing inventory at 30 September 2002 at that figure, were subsequently sold for $80,000 after they were found to have deteriorated while held in inventory. The directors are unsure whether to adjust the inventory figure downwards by $40,000 or allow the loss to fall in the period when the deterioration was discovered. (2 marks) NA 3. In October 2003 a fire destroyed part of the companys warehouse, with an uninsured loss of inventory worth $180,000 and damage to the building, also uninsured, of $228,000. The going concern status of the company is not affected. (2 marks) NA Advise the board of directors as to the correct treatment of each of these items, quoting the authority for your advice in each case and stating the effect, if any, on the income statement and balance sheet. QUESTION FFQA4 (1) The bankruptcy of a major customer, with a substantial debt outstanding at the balance sheet date. (2) A fire destroying some of the companys inventory (the companys going concern status is not affected). (3) An issue of shares to finance expansion. (4) Sale for less than cost of some inventory held at the balance sheet date. According to IAS 10 Events after the Balance Sheet Date, which of the above events require an adjustment to the figures in the draft financial statements? A 1 and 4 only B 1, 2 and 3 only C 2 and 3 only D 2 and 4 only QUESTION FFQA5 Which of the following statements about limited liability companies accounting is/are correct? 1 A revaluation reserve arises when a non-current asset is sold at a profit. 2 The authorised share capital of a company is the maximum nominal value of shares and loan notes the company may issue. 3 The notes to the financial statements must contain details of all adjusting events as defined in IAS10 Events after the balance sheet date. A All three statements B 1 and 2 only C 2 and 3 only D None of the statements

Prepared by: Mohammad Faizan Farooq Qadri Attari ACCA (Finalist)

http://www.ffqacca.co.cc

Contact: faizanacca@yahoo.com

COPYRIGHT 2010 BY Mohammad Faizan Farooq Page # 3 QUESTION FFQA6 Which of the following events after the balance sheet date would normally qualify as adjusting events according to IAS 10 Events after the balance sheet date? 1 The bankruptcy of a credit customer with a balance outstanding at the balance sheet date. 2 A decline in the market value of investments. 3 The declaration of an ordinary dividend. 4 The determination of the cost of assets purchased before the balance sheet date. A 1, 3, and 4 B 1 and 2 only C 2 and 3 only D 1 and 4 only QUESTION FFQA7 Which of the following statements are correct, according to IAS 10 Events after the balance sheet date? 1 Details of all adjusting events must be disclosed by note to the financial statements. 2 A material loss arising from the sale, after the balance sheet date, of inventory valued at cost at the balance sheet date must be reflected in the financial statements. 3 If the market value of investments falls materially after the balance sheet date, the details must be disclosed by note. 4 Events after the balance sheet date are those that occur between the balance sheet date and the date when the financial statements are authorised for issue. A 1 and 2 only B 1, 3 and 4 C 2 and 3 only D 2, 3 and 4

Prepared by: Mohammad Faizan Farooq Qadri Attari ACCA (Finalist)

http://www.ffqacca.co.cc

Contact: faizanacca@yahoo.com