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FAC 3701 > IAS 10 > Flashcards

IAS 10 Flashcards

0
Q

What type of events can occur after reporting date?

A
  1. An adjusting event

2. Non-adjusting event

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1
Q

What is IAS 10?

A

Events after reporting date

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2
Q

What is an adjusting event?

A

And event that already exists and further information is received about it

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3
Q

An example of adjusting date?

A

A debtor becomes bad after reporting date

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4
Q

What is a non adjusting event?

A

An event that never existed before reporting date, but is later to that period and so must be mentioned

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5
Q

How are non-adjusting events handled?

A

They are ONLY disclosed
No changes are made in the statements
- reason
- financial effect

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6
Q

What are the three exceptions to non-adjusting events?

A
  1. Dividends declared
  2. Going concern
  3. Audit fees
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7
Q

What is the period that concerns IAS 10?

A

The time period between reporting date and when the financial statements are authorized
(timeline)

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8
Q

When is the provision made when an obligation arises?

A

Only once the outflow is probable

time line

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9
Q

What if a provision need to be adjusted after RD?

A

Dr. Expense

Cr. Provision

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10
Q

If a provision existed but only possibly, is it an adjusting or non-adjusting event?

A

Because the provision still existed even if not recorded, it’s still an adjusting event

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11
Q

What is an example of a non-adjusting event?

A

A fire burning down inventory after RD

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12
Q

What are some examples of adjusting events after reporting date?

A
  1. Resolution of court cases
    - adjusting a provision
    - creating a provision
  2. Impairment of asset or previous impairment adjusted
    - bankruptcy of debtor
    - net realizable value adjustment
  3. Adjustment to a cost of an asset or proceeds received
  4. Fraud or errors
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13
Q

If a rock formation is discovered that will impair production, what kind of event is this?

A

An adjusting because it was always there

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14
Q

Is a decline in MV after RD adjusting or non?

A

A Non adjusting

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15
Q

A major business combination after RD, adjust or non?

A

Non

16
Q

Resolution of court case, adjusting or non?

A

Adjusting

17
Q

Impairment of asset, adjusting or non ?

A

Adjusting

18
Q

Adjustment to cost of assets or proceeds? Adjustable or non?

A

Adjustable

19
Q

Fraud or error adjustments, adjustable or non?

A

Adjustable

20
Q

Major business combination adjustable or not?

A

Non

21
Q

Plan to discontinue operations, adjustable or non?

A

Non

22
Q

Major disposal of asset, adjustable or non?

A

Non

23
Q

Restructuring, adjustable or non?

A

Non

24
Q

Ordinary share transactions, adjustable or non?

A

Non

25
Q

Change in asset prices or foreign exchange rates, adjusting or non?

A

Non

26
Q

Change in tax rates, adjustable or non?

A

Non

27
Q

What must always be assumed about debtors?

A

They are always in financial difficulty so if they go bad it is an adjusting event

28
Q

What is the journal entry for credit losses?

A

Dr. Credit loss P/L

Cr. Debtors (could be allowance)

29
Q

What is the accompanying tax journal entry for bad debt?

A

Dr. SARS

Cr. Tax expense

30
Q

How are the profits affected when a credit loss is am, taking into account the tax implications?

A

The profits will decrease with the difference between credit loss and tax deduction

31
Q

If a bad debt is recorded, along with its tax implications, how would this affect SOFP?

A
  1. The current assets, trade and receivables, will decrease with bad debt amount
  2. Equity will decrease, retained earnings, by the amount between bad debt and tax expense
  3. Current liability, SARS or current tax, decreases by the tax amount
32
Q

How is the SOCI affected if there was a bad debt along with tax implications?

A
  1. Expenses will increase by credit loss amount
  2. Tax expense will decrease by the tax expense amount
  3. Profits will decrease by inference between the above two amounts
33
Q

What is e exception to the rule that debtors will always be bad?

A

If they suddenly can’t settle their debt because of an event such as a fire after reporting date, then this is seen as a non-adjusting event and a note is made

34
Q

Decrease in NRV is adjustable or non?

A

Adjustable

35
Q

What is the journal entry for adjustment in NRV?

A

Dr. Cost of Sales

Cr. Inventory (or whatever asset decreased)

FAC 3701 (6 decks)

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