FR IAS 37 & IAS 10

Which TWO of the following events which occur after the reporting date of an entity but

before the financial statements are authorised for issue are classified as ADJUSTING events

in accordance with IAS 10 Events after the Reporting Period?

• A change in tax rate announced after the reporting date, but affecting the current tax

  liability

• The discovery of a fraud which had occurred during the year

• The determination of the sale proceeds of an item of plant sold before the year end

• The destruction of a factory by fire

Using the requirements set out in IAS 10 Events after the Reporting Period, which of the

following would be classified as an adjusting event after the reporting period in financial

statements ended 31 March 20X4 that were approved by the directors on 31 August 20X4?

• A reorganisation of the enterprise, proposed by a director on 31 January 20X4 and

  agreed by the Board on 10 July 20X4.

• A strike by the workforce which started on I May 20X4 and stopped all production for

  10 weeks before being settled.

• The receipt of cash from a claim on an insurance policy for damage caused by a fire in

  a warehouse on I January 20X4. The claim was made in January 20X4 and the amount

  of the claim had not been recognised at 31 March 20X4 as it was uncertain that any

  money would be paid. The insurance enterprise settled with a payment of $1.5 million

  on I June 20X4.

• The enterprise had made large export sales to the USA during the year. The year-end

  receivables included $2 million for amounts outstanding that were due to be paid in

  US dollars between 1 April 20X4 and 1 July 20X4. By the time these amounts were

  received, the exchange rate had moved in favour of the enterprise.

Which of the following are outlined in IAS 37 Provisions, Contingent Liabilities and

Contingent Assets as criteria required for recognising a provision?

(i)An entity has a present obligation from a past event.

(ii)It is possible that an outflow of resources will be required.

(iii)A reliable estimate can be made of the amount of the obligation.

• (i), (ii) and (iii)

• (i) and (ii) only

• (i) and (iii) only

• (ii) and (iii) only

What amount should be recognised as a provision in respect of the workplace accident

claim in the year ended 31 December 20X4?

• Nil

• $1.8 million

• $2 million

• $3 million

What amount should be recognised as a restructuring provision in the year ended

31 December 20X4?

• $1.2 million

• $2.0 million

• $3.2 million

• $4.0 million

There is no legal obligation for Promoil to remove the oil platform, but Promoil has a

published environmental policy which it has a history of honouring.

Which of the following is correct regarding Promoil's proposed accounting treatment?

• No provision should be recorded as there is no legal obligation

• Promoil should recognise a provision as there is a constructive obligation

• No provision should be made but a contingent liability should be recorded

• If Promoil make a provision, the present value of the costs will be expensed in the

  statement of profit or loss for the year to 30 September 20X8

On 18 November 20X8 the government announced tax changes which have the effect of

increasing Promoil's deferred tax liability by $650,000 as at 30 September 20X8.

Which of the following is correct in respect of IAS 10 Events After the Reporting Period

regarding the tax changes?

• This is a non-adjusting event and no disclosure is required

• This is an adjusting event

• This is neither an adjusting or non-adjusting event

• This is an adjusting event and the financial statements should be reissued

Promoil owns the whole of the equity share capital of its subsidiary Hamlet. Hamlet's

statement of financial position includes a loan of $25 million that is repayable in five years'

time. $15 million of this loan is secured on Hamlet's property and the remaining $10 million

is guaranteed by Promoil in the event of a default by Hamlet. It is possible that Hamlet will

be unable to repay the loan, but not likely.

How should this be treated in the financial statements of Promoil?

• A contingent liability

• A provision

• Not included in Promoil's financial statements

• A reduction to property, plant and equipment

In accordance with IAS 10 Events after the Reporting Period, which of the following

statements is/are CORRECT for Manda Co?

(1) All events which occur between 30 September 20X3 and 15 December 20X3 should be

considered as events occurring after the reporting period

(2) An event which between 30 September 20X3 and 15 December 20X3 and which

provides evidence of a condition which existed at 30 September 20X3 should be

considered as an adjusting event

• 1 only

• Both 1 and 2

• 2 only

• Neither I nor 2

In accordance with IAS 10, which of the following events would be classed as a non-

adjusting event in Manda CO's financial statements for the year ended 30 September 20X3?

• During October 20X3, there was evidence of a permanent diminution in the carrying

  amount of a property held at 30 September 20X3

• On 1 December 20X3 the acquisition of a subsidiary was completed, following lengthy

  negotiations which began in September 20X3

• The sale of inventory during October 20X3 at a value less than its cost, This inventory

  was included in the financial statements at cost on 30 September 20X3

• The insolvency of a major customer during October 20X3, whose balance was included

  within receivables at 30 September 20X3