- 3 Marks
PSA – Nov 2024 – L2 – Q4c – Events After the Reporting Date
Explanation of events occurring after the reporting date and their impact on financial statements.
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- 5 Marks
FR – Nov 2024 – L2 – Q2b – Events After the Reporting Period
Accounting treatment of a court ruling after the reporting period and its impact on Mulba LTD’s financial statements.
Question
As a Trainee Financial Accountant working for Mulba LTD, a technology business, you have been asked by the Financial Controller to provide guidance on how to account for a variety of transactions that took place after the company’s fiscal year ended on December 31, 2023.
Mulba LTD was sued by a customer who was dissatisfied with the quality of a product delivered in June 2023. The court case was heard in late October 2023, but the judgment was delivered on 8 January 2024, ruling in favor of Mulba LTD. The ruling awarded the company legal costs of GH¢20,000 to cover solicitor’s fees.
The legal costs were paid by the customer to Mulba LTD on 12 January 2024.
Mulba LTD was doubtful of winning the case and had previously made a provision in its financial statements for the year ended 31 December 2023 as follows:
| Account | Debit (GH¢) | Credit (GH¢) |
|---|---|---|
| Legal Fees – Administrative Expenses | 25,000 | – |
| Cost of Sales | 35,000 | – |
| Provisions – Current Liabilities | – | 60,000 |
Required:
In accordance with IAS 10: Events after the Reporting Period, advise the management of Mulba LTD on the proper accounting treatment of the above issue to ensure that the financial statements are prepared in compliance with IFRS.
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- 20 Marks
PSAF – Nov 2014 – L2 – Q4 – Public Sector Financial Statements
Explanation of reporting vs. authorization dates, and types of events after reporting date with treatment examples.
Question
The General National Communication Commission (GNCC) is the sub-regulatory body in the Communications industry. It is mandatory for the Board of GNCC to submit its Report/Financial statements to the Ministry of Communication before publication in accordance with IPSAS 14 (Events after the reporting date). The events occurring after the reporting date could be favourable and/or unfavourable.
You are required to:
a. Distinguish between the reporting date and authorization date of the financial statements, giving examples. (4 Marks)
b. Explain briefly the differences between Adjusting and Non-Adjusting events after the reporting date, giving TWO examples of each. (8 Marks)
c. Identify the events (occurring after the reporting date) in the following situations and explain briefly the treatment of each:
i. General National Communication Commission carries its inventories at the lower of cost and net realizable value. At 31 December 2013, the cost of inventory determined under the First In, First Out (FIFO) method as reported in its financial statement for the year ended was N5 million. Due to severe recession and negative economic trends, the inventory could not be sold in January 2014. On 10 February, GNCC entered into an agreement to sell the entire inventory for N3 million. (2 Marks)
ii. The statutory audit of GNCC for the year ended 31 December 2012 was completed on 28 February 2013. The Financial Statement was signed by the Chief Executive Officer on 8 March 2013 and approved on 10 April 2013. The following events have since occurred:
A special equipment costing N605,000 purchased on 1 September, 2012
was destroyed by fire on 31 December, 2012. GNCC had booked a
receivable of N508,000 from the insurance company in respect of this
claim. On completion of investigation by the insurance company, it was
discovered that the fire broke out due to negligence on the part of a
machine operator. Consequently, the insurance company repudiated
liability.
iii. A debtor owing N900,000 filed for bankruptcy on January 15, 2013. The financial statements had included an allowance for doubtful debts relating to this debtor for N60,000 only. (2 Marks)
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- 14 Marks
FR – Nov 2020 – L2 – Q3b – Events After the Reporting Period (IAS 10)
Advise on accounting treatment for events after the reporting date in a company case study.
Question
(b) The following events took place in Chakachaka Company Nig. Limited:
(i) Shortly after the financial year ended on June 30, 2018, but before the financial statements were authorized for issue, Chakachaka Nigeria Limited’s inventory was destroyed by a fire outbreak which resulted in a loss of N200 million.
(ii) The company’s financial year that ended June 30, 2018, shows an amount of N60 million due from one of its debtors, Mr. Onigbese. Chakachaka Nigeria Limited provided for impairment at June 30, 2018, of N15 million against the gross value of N60 million. On July 31, 2018, before the financial statements were authorized for issue, Mr. Onigbese was declared bankrupt and unable to pay the debt.
(iii) Chakachaka Nigeria Limited was sued on June 30, 2018, but the judgment was only handed down on July 21, 2018. The Company was found liable for damages and costs amounting to N31 million. On July 22, 2018, Chakachaka Nigeria Limited filed a claim with its insurers, and on July 29, 2018, it was notified that the insurer would only cover N26 million of the loss.
Required:
Prepare a brief memorandum advising the directors of Chakachaka Nigeria Limited on the accounting treatment and/or disclosure required as a result of the events in (i) to (iii) after the reporting date.
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- Tags: Adjusting Events, Financial Disclosure, IAS 10, Non-adjusting Events
- Level: Level 2
- Topic: Events After the Reporting Period (IAS 10)
- Series: NOV 2020
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- 6 Marks
FR – Nov 2020 – L2 – Q3a – Events After the Reporting Period (IAS 10)
Discussion of key concepts under IAS 10 related to events after the reporting period.
Question
IAS 10 on events after the reporting period has two main objectives:
- To specify when a company should adjust its financial statements for events that occur after the end of the reporting period.
- To specify the disclosure that should be given about events that have occurred after the end of the reporting period but before the financial statements were authorized for issue.
Required:
Discuss the following key concepts under IAS 10:
i. Event after the reporting period
ii. Adjusting events
iii. Non-adjusting events
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- Tags: Adjusting Events, Events After Reporting Period, IAS 10, Non-adjusting Events
- Level: Level 2
- Topic: Events After the Reporting Period (IAS 10)
- Series: NOV 2020
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- 10 Marks
AA – Nov 2019 – L2 – Q4a – Completion Procedures and Reporting
Classifies subsequent events and indicates the required treatment in financial statements.
Question
During the audit of Die Hard Company Limited, the following items were listed on the file divider under subsequent events:
i) Kodjo Armah, a major debtor for GH¢400,000 has been found to be insolvent.
ii) Large quantities of stocks were destroyed by fire in the first month after the reporting date.
iii) Judgment in respect of litigation that was ongoing before the year-end has been given against the company shortly after the end of the financial year. The judgment debt was GH¢5 million.
iv) Two customers had put in a claim in respect of goods sold to them under warranty before the year-end of GH¢300,000 and GH¢450,000 respectively. No provision was made for warranty claims in the financial statements.
v) The company issued fresh equity shares after the year-end. The number of shares was 2.5 million which generated GH¢5 million.
Required:
Classify the above items and indicate the treatment required in the financial statements.
(10 marks)
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- Tags: Adjusting Events, Financial Reporting, Non-adjusting Events, Subsequent Events
- Level: Level 2
- Topic: Completion Procedures and Reporting
- Series: NOV 2019
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- 10 Marks
AA – Mar 2024 – L2 – Q5a – Completion Procedures and Reporting
Identify subsequent events and recommend auditor actions based on two scenarios for Benkum Ltd.
Question
Atiko Audit firm is the external auditor of Benkum Ltd, a company operating in the oil and gas sector. Benkum Ltd is listed on the Ghana Stock Exchange. On completing the audit for the year ended 31 December 2022, the following issues were brought to the attention of the senior partner:
- On 25 February 2023, Benkum agreed with the workers’ union to increase the pay of all its employees by 10%, backdated to 1 July 2022. No provision for this has been made in the financial statements.
- One of the company’s oil tankers shipwrecked at Cape Three Points on the western side of Ghana. There is a risk of serious oil spillage which could have a significant effect on the future of the company. Further information will not be available until after the auditor’s report has been signed.
Required:
i) State TWO (2) types of the event identified by ISA 560: Subsequent Events in relation to the scenario above. (2 marks)
ii) What further action should Atiko Audit firm take concerning each of the above issues? (8 marks)
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- Tags: Adjusting Events, ISA 560, Non-adjusting Events, Subsequent Events
- Level: Level 2
- Topic: Completion Procedures and Reporting
- Series: MAR 2024
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- 4 Marks
FR – Nov 2016 – L2 – Q2d – Financial Statement Analysis
Discuss the effects of two events on the financial statements in accordance with IAS 10 Events after the Reporting Period.
Question
Suame Ltd is a listed telecommunication company which prepares its financial statements for the year ended 31 October 2015 in accordance with IFRS. The financial statements are due to be authorised for issue on 15 January 2016.
- i) Suame Ltd holds an investment in the shares of a listed company, Asafo Ltd. During November 2015 there was a material fall in the value of Asafo Ltd’s shares. Analysts attribute the fall in value principally to a fraud dating back to December 2014 that was discovered by Asafo Ltd’s management and announced publicly in November 2015.
- ii) In December 2015, the directors of Suame Ltd publicly announced a plan to reduce the workforce by 10% as a result of worsening economic conditions.
Required:
Discuss the effects of each of the above items on the financial statements of Suame Ltd for the year ended 31 October 2015 in accordance with IAS 10 Events after the Reporting Period.
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- Tags: Adjusting Events, Fraud, IAS 10, Non-adjusting Events, Post-reporting events, Restructuring
- Level: Level 2
- Topic: Financial Statement Analysis
- Series: NOV 2016
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- 4 Marks
FR – Nov 2018 – L2 – Q2d- Financial Reporting Standards and Their Applications
This question tests the classification of events after the reporting period as either adjusting or non-adjusting.
Question
The following events occurred after the year end, but before the financial statements were authorised for issue:
- Enactment by the government of a revised tax rate affecting the amount of the settlement of the deferred tax liability included in the financial statements.
- A share split in respect of the earnings per share calculation.
- Criteria being met in order to classify non-current assets as held for sale.
- A material, but not fundamental, error arising in the comparative figures.
Required:
In accordance with IAS 10: Events after the reporting period, explain with justification whether each of the above is an adjusting or a non-adjusting event after the reporting period.
Find Related Questions by Tags, levels, etc.
- Tags: Adjusting Events, Deferred Tax, Earnings Per Share, IAS 10, Non-adjusting Events
- Level: Level 3
- Topic: Financial Reporting Standards and Their Applications
- Series: NOV 2018
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- 5 Marks
CR – Nov 2018 – L3 – Q2a – Non-current assets held for sale and discontinued operations
Discuss the financial reporting issues for Builsa Ltd regarding the planned closure of a division and the redundancy of employees under IFRS 5.
Question
Builsa Ltd (Builsa) is a listed company that assembles personal computers (PCs), and it is preparing its financial statements for the year ended 31 May 2018. Builsa plans to close down one of its divisions. This division, which is classified as a separate business segment, will cease all of its activities on 31 July 2018. Most of the assets of the business will be redeployed elsewhere in Builsa’s business; however, some smaller items of plant will be sold off or scrapped. Approximately half of the staff of the division will be made redundant, and they were notified of the decision in late May 2018. Customers and suppliers were notified at the same time. The annual 2018 financial statements are scheduled to be released to the markets on 9 August 2018.
Required:
Advise the directors as to the financial reporting issues arising from the above matters and explain the appropriate treatment in Builsa’s financial statements in each case.
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- 3 Marks
PSA – Nov 2024 – L2 – Q4c – Events After the Reporting Date
Explanation of events occurring after the reporting date and their impact on financial statements.
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- 5 Marks
FR – Nov 2024 – L2 – Q2b – Events After the Reporting Period
Accounting treatment of a court ruling after the reporting period and its impact on Mulba LTD’s financial statements.
Question
As a Trainee Financial Accountant working for Mulba LTD, a technology business, you have been asked by the Financial Controller to provide guidance on how to account for a variety of transactions that took place after the company’s fiscal year ended on December 31, 2023.
Mulba LTD was sued by a customer who was dissatisfied with the quality of a product delivered in June 2023. The court case was heard in late October 2023, but the judgment was delivered on 8 January 2024, ruling in favor of Mulba LTD. The ruling awarded the company legal costs of GH¢20,000 to cover solicitor’s fees.
The legal costs were paid by the customer to Mulba LTD on 12 January 2024.
Mulba LTD was doubtful of winning the case and had previously made a provision in its financial statements for the year ended 31 December 2023 as follows:
| Account | Debit (GH¢) | Credit (GH¢) |
|---|---|---|
| Legal Fees – Administrative Expenses | 25,000 | – |
| Cost of Sales | 35,000 | – |
| Provisions – Current Liabilities | – | 60,000 |
Required:
In accordance with IAS 10: Events after the Reporting Period, advise the management of Mulba LTD on the proper accounting treatment of the above issue to ensure that the financial statements are prepared in compliance with IFRS.
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- 20 Marks
PSAF – Nov 2014 – L2 – Q4 – Public Sector Financial Statements
Explanation of reporting vs. authorization dates, and types of events after reporting date with treatment examples.
Question
The General National Communication Commission (GNCC) is the sub-regulatory body in the Communications industry. It is mandatory for the Board of GNCC to submit its Report/Financial statements to the Ministry of Communication before publication in accordance with IPSAS 14 (Events after the reporting date). The events occurring after the reporting date could be favourable and/or unfavourable.
You are required to:
a. Distinguish between the reporting date and authorization date of the financial statements, giving examples. (4 Marks)
b. Explain briefly the differences between Adjusting and Non-Adjusting events after the reporting date, giving TWO examples of each. (8 Marks)
c. Identify the events (occurring after the reporting date) in the following situations and explain briefly the treatment of each:
i. General National Communication Commission carries its inventories at the lower of cost and net realizable value. At 31 December 2013, the cost of inventory determined under the First In, First Out (FIFO) method as reported in its financial statement for the year ended was N5 million. Due to severe recession and negative economic trends, the inventory could not be sold in January 2014. On 10 February, GNCC entered into an agreement to sell the entire inventory for N3 million. (2 Marks)
ii. The statutory audit of GNCC for the year ended 31 December 2012 was completed on 28 February 2013. The Financial Statement was signed by the Chief Executive Officer on 8 March 2013 and approved on 10 April 2013. The following events have since occurred:
A special equipment costing N605,000 purchased on 1 September, 2012
was destroyed by fire on 31 December, 2012. GNCC had booked a
receivable of N508,000 from the insurance company in respect of this
claim. On completion of investigation by the insurance company, it was
discovered that the fire broke out due to negligence on the part of a
machine operator. Consequently, the insurance company repudiated
liability.
iii. A debtor owing N900,000 filed for bankruptcy on January 15, 2013. The financial statements had included an allowance for doubtful debts relating to this debtor for N60,000 only. (2 Marks)
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- 14 Marks
FR – Nov 2020 – L2 – Q3b – Events After the Reporting Period (IAS 10)
Advise on accounting treatment for events after the reporting date in a company case study.
Question
(b) The following events took place in Chakachaka Company Nig. Limited:
(i) Shortly after the financial year ended on June 30, 2018, but before the financial statements were authorized for issue, Chakachaka Nigeria Limited’s inventory was destroyed by a fire outbreak which resulted in a loss of N200 million.
(ii) The company’s financial year that ended June 30, 2018, shows an amount of N60 million due from one of its debtors, Mr. Onigbese. Chakachaka Nigeria Limited provided for impairment at June 30, 2018, of N15 million against the gross value of N60 million. On July 31, 2018, before the financial statements were authorized for issue, Mr. Onigbese was declared bankrupt and unable to pay the debt.
(iii) Chakachaka Nigeria Limited was sued on June 30, 2018, but the judgment was only handed down on July 21, 2018. The Company was found liable for damages and costs amounting to N31 million. On July 22, 2018, Chakachaka Nigeria Limited filed a claim with its insurers, and on July 29, 2018, it was notified that the insurer would only cover N26 million of the loss.
Required:
Prepare a brief memorandum advising the directors of Chakachaka Nigeria Limited on the accounting treatment and/or disclosure required as a result of the events in (i) to (iii) after the reporting date.
Find Related Questions by Tags, levels, etc.
- Tags: Adjusting Events, Financial Disclosure, IAS 10, Non-adjusting Events
- Level: Level 2
- Topic: Events After the Reporting Period (IAS 10)
- Series: NOV 2020
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- 6 Marks
FR – Nov 2020 – L2 – Q3a – Events After the Reporting Period (IAS 10)
Discussion of key concepts under IAS 10 related to events after the reporting period.
Question
IAS 10 on events after the reporting period has two main objectives:
- To specify when a company should adjust its financial statements for events that occur after the end of the reporting period.
- To specify the disclosure that should be given about events that have occurred after the end of the reporting period but before the financial statements were authorized for issue.
Required:
Discuss the following key concepts under IAS 10:
i. Event after the reporting period
ii. Adjusting events
iii. Non-adjusting events
Find Related Questions by Tags, levels, etc.
- Tags: Adjusting Events, Events After Reporting Period, IAS 10, Non-adjusting Events
- Level: Level 2
- Topic: Events After the Reporting Period (IAS 10)
- Series: NOV 2020
Report an error
- 10 Marks
AA – Nov 2019 – L2 – Q4a – Completion Procedures and Reporting
Classifies subsequent events and indicates the required treatment in financial statements.
Question
During the audit of Die Hard Company Limited, the following items were listed on the file divider under subsequent events:
i) Kodjo Armah, a major debtor for GH¢400,000 has been found to be insolvent.
ii) Large quantities of stocks were destroyed by fire in the first month after the reporting date.
iii) Judgment in respect of litigation that was ongoing before the year-end has been given against the company shortly after the end of the financial year. The judgment debt was GH¢5 million.
iv) Two customers had put in a claim in respect of goods sold to them under warranty before the year-end of GH¢300,000 and GH¢450,000 respectively. No provision was made for warranty claims in the financial statements.
v) The company issued fresh equity shares after the year-end. The number of shares was 2.5 million which generated GH¢5 million.
Required:
Classify the above items and indicate the treatment required in the financial statements.
(10 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Adjusting Events, Financial Reporting, Non-adjusting Events, Subsequent Events
- Level: Level 2
- Topic: Completion Procedures and Reporting
- Series: NOV 2019
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- 10 Marks
AA – Mar 2024 – L2 – Q5a – Completion Procedures and Reporting
Identify subsequent events and recommend auditor actions based on two scenarios for Benkum Ltd.
Question
Atiko Audit firm is the external auditor of Benkum Ltd, a company operating in the oil and gas sector. Benkum Ltd is listed on the Ghana Stock Exchange. On completing the audit for the year ended 31 December 2022, the following issues were brought to the attention of the senior partner:
- On 25 February 2023, Benkum agreed with the workers’ union to increase the pay of all its employees by 10%, backdated to 1 July 2022. No provision for this has been made in the financial statements.
- One of the company’s oil tankers shipwrecked at Cape Three Points on the western side of Ghana. There is a risk of serious oil spillage which could have a significant effect on the future of the company. Further information will not be available until after the auditor’s report has been signed.
Required:
i) State TWO (2) types of the event identified by ISA 560: Subsequent Events in relation to the scenario above. (2 marks)
ii) What further action should Atiko Audit firm take concerning each of the above issues? (8 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Adjusting Events, ISA 560, Non-adjusting Events, Subsequent Events
- Level: Level 2
- Topic: Completion Procedures and Reporting
- Series: MAR 2024
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- 4 Marks
FR – Nov 2016 – L2 – Q2d – Financial Statement Analysis
Discuss the effects of two events on the financial statements in accordance with IAS 10 Events after the Reporting Period.
Question
Suame Ltd is a listed telecommunication company which prepares its financial statements for the year ended 31 October 2015 in accordance with IFRS. The financial statements are due to be authorised for issue on 15 January 2016.
- i) Suame Ltd holds an investment in the shares of a listed company, Asafo Ltd. During November 2015 there was a material fall in the value of Asafo Ltd’s shares. Analysts attribute the fall in value principally to a fraud dating back to December 2014 that was discovered by Asafo Ltd’s management and announced publicly in November 2015.
- ii) In December 2015, the directors of Suame Ltd publicly announced a plan to reduce the workforce by 10% as a result of worsening economic conditions.
Required:
Discuss the effects of each of the above items on the financial statements of Suame Ltd for the year ended 31 October 2015 in accordance with IAS 10 Events after the Reporting Period.
Find Related Questions by Tags, levels, etc.
- Tags: Adjusting Events, Fraud, IAS 10, Non-adjusting Events, Post-reporting events, Restructuring
- Level: Level 2
- Topic: Financial Statement Analysis
- Series: NOV 2016
Report an error
- 4 Marks
FR – Nov 2018 – L2 – Q2d- Financial Reporting Standards and Their Applications
This question tests the classification of events after the reporting period as either adjusting or non-adjusting.
Question
The following events occurred after the year end, but before the financial statements were authorised for issue:
- Enactment by the government of a revised tax rate affecting the amount of the settlement of the deferred tax liability included in the financial statements.
- A share split in respect of the earnings per share calculation.
- Criteria being met in order to classify non-current assets as held for sale.
- A material, but not fundamental, error arising in the comparative figures.
Required:
In accordance with IAS 10: Events after the reporting period, explain with justification whether each of the above is an adjusting or a non-adjusting event after the reporting period.
Find Related Questions by Tags, levels, etc.
- Tags: Adjusting Events, Deferred Tax, Earnings Per Share, IAS 10, Non-adjusting Events
- Level: Level 3
- Topic: Financial Reporting Standards and Their Applications
- Series: NOV 2018
Report an error
- 5 Marks
CR – Nov 2018 – L3 – Q2a – Non-current assets held for sale and discontinued operations
Discuss the financial reporting issues for Builsa Ltd regarding the planned closure of a division and the redundancy of employees under IFRS 5.
Question
Builsa Ltd (Builsa) is a listed company that assembles personal computers (PCs), and it is preparing its financial statements for the year ended 31 May 2018. Builsa plans to close down one of its divisions. This division, which is classified as a separate business segment, will cease all of its activities on 31 July 2018. Most of the assets of the business will be redeployed elsewhere in Builsa’s business; however, some smaller items of plant will be sold off or scrapped. Approximately half of the staff of the division will be made redundant, and they were notified of the decision in late May 2018. Customers and suppliers were notified at the same time. The annual 2018 financial statements are scheduled to be released to the markets on 9 August 2018.
Required:
Advise the directors as to the financial reporting issues arising from the above matters and explain the appropriate treatment in Builsa’s financial statements in each case.
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