Ias 10

Question 1

Events after reporting period

Answer 1

Those events both favorable and unfavorable that occur between the reporting date and the date on which the financial statements are authorized for issue.

Question 2

Types of events after reporting period

Answer 2

Adjusting

Non-adjusting

Question 3

Examples of adjusting events

Answer 3

Sale of inventory - evidence about nrv on reporting date
Bankruptcy of a customer - confirms that allowance is required against a receivables balance at the reporting date
Discovery of fraud or errors - this shows that financial statements are incorrect
Settlement after the reporting of a court case - confirms existence and value of the entity’s obligation at the reporting date

Question 4

Non adjusting events

Answer 4

After reporting date

1. Major business combination
2. Disposal of major subsidiary
3. Announcing plan to discontinue an operation
4. Major purchases and disposal of assets
5. Destruction of assets by a fire
6. Announcing or commencing a major restructuring
7. Large changes after reporting date in foreign exchange rates
8. Equity dividends declared or proposed

Question 5

Treatment of non adjusting events

Answer 5

Material non adjusting events require following disclosures

1. Description of event
2. Estimated financial effect

Question 6

Break up basis

Answer 6

If going concern assumption is no longer appropriate then IAS 10 states that financial statements using break up basis

Question 7

Financial statements should reflect

Answer 7

Conditions at the reporting date

Question 8

When can financial statements not be prepared on going concern basis

Answer 8

If after reporting date , management decides to liquidate entity or cease trading. Or has no other realistic alternative.

Question 9

Going concern as per ias 1

Answer 9

Management must disclose any material uncertainties relating to events or conditions that cast significant doubt upon an entity’s ability to continue trading

Question 10

Contingent asset

Answer 10

Contingent฀asset (IAS฀37):฀a฀possible฀asset฀that฀arises฀from฀past฀events฀and฀whose฀existence฀ will฀be฀confirmed฀by฀the฀occurrence฀of฀one฀or฀more฀uncertain฀future฀events฀not฀wholly฀within฀the฀ entity’s฀control.฀฀

Question 11

Accounting for contingent asset

Answer 11

(IAS฀37:฀para.฀10)฀
A฀ contingent฀ asset฀ should฀ not฀ be฀ recognised,฀ but฀ should฀ be฀ disclosed฀ where฀ an฀ inflow฀ of฀ economic฀benefits฀is฀probable฀(IAS฀37:฀para฀34).฀
A฀ brief฀ description฀ of฀ the฀ contingent฀ asset฀ should฀ be฀ provided฀ along฀ with฀ an฀ estimate฀ of฀ its฀ likely฀ financial฀effect฀(IAS฀37:฀para.฀89).฀