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1. also ma’am in this question the acq of valentine and disposal of primal burgers’ decision had been approved by Board pre-year end, the fact that ultimate disposal/acq happens post year end should be an adjusting event! As it provides evidence(ultimate transaction) about a condition that existed(board approval) at the reporting date!
2. part D, maam here how do we know if the audit senior would continue to serve as an audit senior of Ryder grp or not, after accepting the responsibility of FR expert in Audit committee of client? while writing my comments due to the ambiguity can I assume that he will continue to remain audit senior for Ryder’s audit + FR expert in Audit Committee?
1. A board minute is evidence only of authorisation/approval of a transaction to OCCUR in the FUTURE – i.e. an intention. A transaction doesn’t OCCUR simply because the directors agree to a course of action (e.g. to sell/acquire an asset).
2. You don’t know and you don’t have to assume – you are required to “discuss any ethical issues … and recommend appropriate actions [e.g. safeguards]”. So you need to recognise the conflict IF he were to remain a member of the audit team (since it doesn’t say that he will not be) and then you can recommend that he should not be a member of the audit team.
with re to your answer to my first question: an event is an adjusting event if new evidence becomes available about a condition that existed at the reporting date.
At the reporting date the primal burgers may have been recorded in accordance with IFRS 5, right? So when post yr end primal burgers finally gets sold, does not it provide evidence(transaction done-sold) of a condition (held for sale) that existed at the reporting date? hence my argument for Adjusting event…
In short – management intent alone cannot justify an accounting treatment.
Consider for example management decides before the reporting date 31 March to close a department and make people redundant. Those affected are notified on 5th April. There is no constructive obligation before 5th April – and it cannot be “created” retrospectively.
Another example to illustrate that hindsight alone does not provide evidence of a condition existing at the reporting date. As I mentioned on a recent post for the capitalisation of an intangible asset – say software development – various criteria must be met. If at the reporting date 31 March 20X5 it is not possible to demonstrate technical feasibility, say, all expense must be written off. If technical feasibility is established in June 20X5, you can’t say “aha! that’s evidence that criteria were met at the reporting date” (!)
Ma’am given that disposal of primal burgers is a non-adjusting event, don’t you think its treatment under IFRS 5 contradicts that of IAS 10? which states that:
“Non-adjusting events do not affect any items in the statement of financial position or the statement of profit or loss and other comprehensive income.”
I mean if the subsidiary to be disposed off is a non-adjusting event then it should not affect SPL or SFP as per IAS 10 then how can we apply IFRS 5 treatments such as reclassification of primal’s assets and liabilities under current assets and current liabilities respectively in the current year end?
okay wait ma’am!!!!!!!!!!
the fact that primal is held for sale is an ADJUSTING EVENT- because 5 criteria for classification as HFS are met before year end
and the fact that it gets sold after year end is a NON-ADJUSTING EVENT- so the corresponding accounting treatment of recognising cash proceeds and derecognising the primal’s results from the consolidated finical statements have no impact on SPL and SFP of this year end
Am I right here in post 2?
consider this as post 2. And the immediate above one as post 1.“Adjusting events” and “non-adjusting events” are by definition events that occurred AFTER the reporting date.
Meeting any criteria BEFORE the reporting date means RECOGNISE at the reporting date. This is NOT “adjustment” within the meaning of IAS 10.
Sale proceeds can only be recognised when the IFRS 15 revenue recognition criteria are MET – either in the current period or in the following period (one of the reasons why cutofff is an important assertion for auditors).
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