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With regards to the lecture video IAS10, I would like to ask about the Example 2.
A legal action has been brought against the company for breach of contract prior to the YE. The outcome was decided shortly after SOFP date and as a result, the company will have to pay costs and damages totally $80,000, No provision has currently been made for this events.
If that is the case, the provision has been recorded in the SOFP, does it still consider as adjusting events? or it is considered as non-adjusting events ady?
The 2nd question I want to ask is about the Example 1
Discovery of fraud or error affecting Financial statementsWhy this one straight away considered as adjusting events?
because it does not mention whether the fraud take place at the reporting date or after the reporting date orhh.
Hope sir can help to clarify my confusion
Thanks you so much
Hi,
It si an adjusting event as it gives evidence of a condition that existed at the reporting date.
If there is a fraud that has been discovered then the fraud doesn’t just happen overnight and it will have been in place at the reporting date, it’s just that we’ve discovered it now.
Thanks
Is that means this sentence- “A legal action has been brought against the company for breach of contract prior to the YE” already prove that the condition already existed at the reporting date?
So, if that is the case, the legal case’s outcome haven’t release before the report was finalised, we need to put provision amount into the account. Am I correct?
If the legal’s case outcome already release and it said that we have to pay the damages and costs amounting to $ XXXX. We need to put the actual damage cost that need to incur in the account? Am I right?
When we saw fraud discovery, we straight away assume that it has been in place at the reporting date? Right?
Thanks SirHi,
If the case was brought before the reporting date then the event must have happened before the reporting date. We wouldn’t bring a case against someone if nothing had happened, so a provision would be made at the reporting date of the amounts expected.
If we know the amounts then these would be the figures that would be provided for.
Yes, per the standard frauds are always recognised, but you do need to the read the question carefully as some of the discovery after the reporting date might relate to events prior to the reporting date and some to after the reporting date.
Thanks
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