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(mock 3 bpp kit question. 1b hill)
Hill has made a loss in the year ended 30 September 20X6, as well as in the previous
two financial years. Hill breached a covenant attached to a bank loan which is due
for repayment in 20X9. The loan is presented in non-current liabilities on the
statement of financial position. The loan agreement terms state that a breach in loan
covenants entitles the bank to demand immediate repayment of the loan. Hill and its
subsidiaries do not have sufficient liquid assets to repay the loan in full. However, on
1 November 20X6 the bank confirmed that repayment of the loan would not be
required until the original due date.sir i’m not understanding why it is a non adjusting event, as the event provides evidence of its existence in the reporting period ?
Always a bit debatable. I can only think that, at the SFP date, the bank had NO INTENTION OF NOT CALLING IN THE LOAN and then changed it’s mind – that probably fits in with the scenario.
BTW – This is Q14 in the current kit – I’m not sure if you are using the up to date one.
so sir, do u mean i can conclude this answer by saying an adjusting event too?
Depends on scenario – I think it was pointing towards non-adjusting.
As always SBR is not about right or wrong – you may reach a different conclusion, and, if supported by scenario, it will be fine.
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