- 4 Marks
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.
Answer
- 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:
Non-adjusting event. IAS 10 (para 22(h)) states that tax rates enacted after the year-end do not meet the definition of a liability at the year-end. - A share split in respect of the earnings per share calculation:
Adjusting event. IAS 33 (para 64) requires adjustments to earnings per share calculations when a share split occurs before the financial statements are issued. - Criteria being met in order to classify non-current assets as held for sale:
Non-adjusting event. According to IAS 10 (para 22(c)), non-current assets are only classified as held for sale if they meet the criteria at the year-end. If the criteria were not met by year-end, this is considered a non-adjusting event. - A material, but not fundamental, error arising in the comparative figures:
Adjusting event. IAS 8 requires all material errors to be corrected retrospectively, making this an adjusting event.
(4 marks)
- 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
- Uploader: Dotse