Events after the Reporting Period

FR – May 2017 – L2 – Q2a – Financial Reporting Standards and Their Applications

Discuss how to account for the cost of site reclamation and the financial effects of an earthquake.

Question

Akakpo Ltd obtained a license free of charge from the government to dig and operate a gold mine. Akakpo Ltd spent GH¢6 million digging and preparing the mine for operation and erecting buildings on site. The mine commenced operations on 1 September 2014. The license requires that at the end of the mine’s useful life of 20 years, the site must be reclaimed, all buildings and equipment must be removed, and the site landscaped. At 31 August 2015, Akakpo Ltd estimated that the cost in 19 years’ time of the removal and landscaping would be GH¢5 million, and its present value is GH¢3 million.

On 31 October 2015, there was a massive earthquake in the area, and Akakpo Ltd’s mine shaft was badly damaged. It is estimated that the mine will be closed for at least six months and will cost GH¢1 million to repair.

Required:

i) Demonstrate how Akakpo Ltd should record the cost of the site reclamation as at 31 August 2015 in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
(3 marks)

ii) Explain how Akakpo Ltd should treat the effects of the earthquake in its financial statements for the year ended 31 August 2015 in accordance with IAS 10 Events after the Reporting Period.
(2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Contingent Assets, Contingent Liabilities, Earthquake, Events after the Reporting Period, IAS 10, IAS 37, Provisions, Reclamation
Level: Level 2

Topic: Financial Reporting Standards and Their Applications
Series: MAY 2017

FA – Nov 2018 – L1 – Q5 – The IASB’s Conceptual Framework

Explain the reasons for not preparing financial statements on a going concern basis and treat events after the reporting period under IAS 10.

Question

a) The financial controller of Kantanka Ltd, a technology company, has asked you, a trainee financial accountant within the company, for an explanation of some accounting terminologies and for advice on how to account for various transactions that occurred after the financial year-end date of 31 December 2016.

Required:
Explain TWO (2) reasons why a company would not prepare its financial statements on a going concern basis. (4 marks)

b) In accordance with IAS 10: Events after the Reporting Period, explain what is meant by an ‘event after the reporting period’. (4 marks)

c) How should the information in (b) above be dealt with in the financial statements? (3 marks)

d) i) Kantanka purchased a motor vehicle on 30 December 2016 and paid a non-refundable deposit of GH¢5,000 on that date. He also wrote a cheque on that date for the balance of GH¢20,000. The seller cashed the cheque on 3 January 2017. (3 marks)

ii) Kantanka Ltd was sued by a customer who was unhappy with the quality of a product delivered to him in June 2016. The court case was heard in late October 2016 but it was not until 8 January 2017 that the judge ruled in favor of Kantanka Ltd and awarded it damages of GH¢20,000 to cover its solicitor’s fees. The legal costs were paid by the customer to Kantanka Ltd on 12 January 2017. Kantanka Ltd was unsure of winning the case and had previously included a provision in its financial statements for the year ended 31 December 2016 for compensation and legal costs as follows:

GH¢	GH¢
Dr Legal Fees – Administrative Expenses	25,000
Dr Cost of Sales	35,000
Cr Provisions – Current Liabilities	60,000
(4 marks)

iii) One of Kantanka’s Ltd customers was declared bankrupt on 5 January 2017, owing GH¢4,000 to Kantanka Ltd. (2 marks)

Required:
How should the issues raised in (i) to (iii) be treated in the financial statements of Kantanka Ltd?

Answer

Find Related Questions by Tags, levels, etc.

Tags: Adjusting Events, Events after the Reporting Period, Going Concern, IAS 10
Level: Level 1

Topic: The IASB’s Conceptual Framework
Series: NOV 2018

FR – May 2017 – L2 – Q2a – Financial Reporting Standards and Their Applications

Discuss how to account for the cost of site reclamation and the financial effects of an earthquake.

Question

Required:

i) Demonstrate how Akakpo Ltd should record the cost of the site reclamation as at 31 August 2015 in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
(3 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Contingent Assets, Contingent Liabilities, Earthquake, Events after the Reporting Period, IAS 10, IAS 37, Provisions, Reclamation
Level: Level 2

Topic: Financial Reporting Standards and Their Applications
Series: MAY 2017

FA – Nov 2018 – L1 – Q5 – The IASB’s Conceptual Framework

Explain the reasons for not preparing financial statements on a going concern basis and treat events after the reporting period under IAS 10.

Question

Required:
Explain TWO (2) reasons why a company would not prepare its financial statements on a going concern basis. (4 marks)

b) In accordance with IAS 10: Events after the Reporting Period, explain what is meant by an ‘event after the reporting period’. (4 marks)

c) How should the information in (b) above be dealt with in the financial statements? (3 marks)

GH¢	GH¢
Dr Legal Fees – Administrative Expenses	25,000
Dr Cost of Sales	35,000
Cr Provisions – Current Liabilities	60,000
(4 marks)

iii) One of Kantanka’s Ltd customers was declared bankrupt on 5 January 2017, owing GH¢4,000 to Kantanka Ltd. (2 marks)

Required:
How should the issues raised in (i) to (iii) be treated in the financial statements of Kantanka Ltd?

Answer

Find Related Questions by Tags, levels, etc.

Tags: Adjusting Events, Events after the Reporting Period, Going Concern, IAS 10
Level: Level 1

Topic: The IASB’s Conceptual Framework
Series: NOV 2018

Question Tag: Events after the Reporting Period

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

FR – May 2017 – L2 – Q2a – Financial Reporting Standards and Their Applications

Discuss how to account for the cost of site reclamation and the financial effects of an earthquake.

FA – Nov 2018 – L1 – Q5 – The IASB’s Conceptual Framework

Explain the reasons for not preparing financial statements on a going concern basis and treat events after the reporting period under IAS 10.

FR – May 2017 – L2 – Q2a – Financial Reporting Standards and Their Applications

Discuss how to account for the cost of site reclamation and the financial effects of an earthquake.

FA – Nov 2018 – L1 – Q5 – The IASB’s Conceptual Framework

Explain the reasons for not preparing financial statements on a going concern basis and treat events after the reporting period under IAS 10.

Our offerings

Contact Info

Customer

Get In Touch

Question Tag: Events after the Reporting Period

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

FR – May 2017 – L2 – Q2a – Financial Reporting Standards and Their Applications

Discuss how to account for the cost of site reclamation and the financial effects of an earthquake.

You're reporting an error for "FR – May 2017 – L2 – Q2a – Financial Reporting Standards and Their Applications"

FA – Nov 2018 – L1 – Q5 – The IASB’s Conceptual Framework

Explain the reasons for not preparing financial statements on a going concern basis and treat events after the reporting period under IAS 10.

You're reporting an error for "FA – Nov 2018 – L1 – Q5 – The IASB’s Conceptual Framework"

FR – May 2017 – L2 – Q2a – Financial Reporting Standards and Their Applications

Discuss how to account for the cost of site reclamation and the financial effects of an earthquake.

You're reporting an error for "FR – May 2017 – L2 – Q2a – Financial Reporting Standards and Their Applications"

FA – Nov 2018 – L1 – Q5 – The IASB’s Conceptual Framework

Explain the reasons for not preparing financial statements on a going concern basis and treat events after the reporting period under IAS 10.

You're reporting an error for "FA – Nov 2018 – L1 – Q5 – The IASB’s Conceptual Framework"

Our offerings

Contact Info

Customer

Get In Touch

admin