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IAS 10- F1 Recap

Forums › Ask CIMA Tutor Forums › Ask CIMA F2 Tutor Forums › IAS 10- F1 Recap

  • This topic has 3 replies, 2 voices, and was last updated 8 years ago by P2-D2.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • August 26, 2016 at 6:54 am #335253
    abz12
    Member
    • Topics: 46
    • Replies: 44
    • ☆☆

    Hi Sir. I know this is a F1 question, but I have seen it in my F2 revision booklet. Please just to clarify some points. Main issue here is point C

    Which ONE of the following would be classified by WDC as a non-adjusting event
    according to IAS 10 Events After The Reporting Period? WDC’s year end is 30
    September 20X1.

    A WDC was notified on 5 November 20X1 that one of its customers was insolvent
    and was unlikely to repay any of its debts. The balance outstanding at 30
    September 20X1 was $42,000.

    — Happened after month end.. why are we adjusting for it? isit because it is a trade receivable?

    B On 30 September WDC had an outstanding court action against it. WDC had
    made a provision in its financial statements for the year ended 30 September
    20X1 for damages awarded against it of $22,000. On 29 October 20X1 the court
    awarded damages of $18,000.

    — Adjusting event

    C On 5 October 20X1 a serious fire occurred in WDC’s main production centre and
    severely damaged the production facility.

    — event happened after month end.. but surely a fire with affects production facility is a big deal that will affect the company.. why is it a non- adjusting event?

    D The year end inventory balance included $50,000 of goods from a discontinued
    product line. On 1 November 20X1 these goods were sold for a net total of
    $20,000.

    — event happens after month end.. valuation of inventory. Ok get this point.

    August 26, 2016 at 5:32 pm #335379
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7156
    • ☆☆☆☆☆

    Hi,

    If it is in F1 then you really don’t need to worry, although I would be slightly concerned that the material you are using seem to think that it is in F2. Which materials are you using if you don’t mind me asking?

    The fire took place after the reporting date so no condition existed at the reporting date so there is no adjusting event. If the fire was material then it would be disclosed in the notes to the accounts.

    The only way it would be an adjusting event is if it was so serious a fire that it meant the company was no longer a going concern, then we would adjust the accounts accordingly.

    Thanks

    August 26, 2016 at 7:21 pm #335428
    abz12
    Member
    • Topics: 46
    • Replies: 44
    • ☆☆

    thanks sir. ok makes sense..

    I am using acorn and bpp. revision guide

    thanks

    August 29, 2016 at 9:16 pm #336110
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7156
    • ☆☆☆☆☆

    I’ve used BPP many times but I’ve never heard of Acorn previously. I’ll have to check them out and see how they compare.

    Thanks

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