IAS 10 Flashcards
What type of events can occur after reporting date?
- An adjusting event
2. Non-adjusting event
What is IAS 10?
Events after reporting date
What is an adjusting event?
And event that already exists and further information is received about it
An example of adjusting date?
A debtor becomes bad after reporting date
What is a non adjusting event?
An event that never existed before reporting date, but is later to that period and so must be mentioned
How are non-adjusting events handled?
They are ONLY disclosed
No changes are made in the statements
- reason
- financial effect
What are the three exceptions to non-adjusting events?
- Dividends declared
- Going concern
- Audit fees
What is the period that concerns IAS 10?
The time period between reporting date and when the financial statements are authorized
(timeline)
When is the provision made when an obligation arises?
Only once the outflow is probable
time line
What if a provision need to be adjusted after RD?
Dr. Expense
Cr. Provision
If a provision existed but only possibly, is it an adjusting or non-adjusting event?
Because the provision still existed even if not recorded, it’s still an adjusting event
What is an example of a non-adjusting event?
A fire burning down inventory after RD
What are some examples of adjusting events after reporting date?
- Resolution of court cases
- adjusting a provision
- creating a provision - Impairment of asset or previous impairment adjusted
- bankruptcy of debtor
- net realizable value adjustment - Adjustment to a cost of an asset or proceeds received
- Fraud or errors
If a rock formation is discovered that will impair production, what kind of event is this?
An adjusting because it was always there
Is a decline in MV after RD adjusting or non?
A Non adjusting
A major business combination after RD, adjust or non?
Non
Resolution of court case, adjusting or non?
Adjusting
Impairment of asset, adjusting or non ?
Adjusting
Adjustment to cost of assets or proceeds? Adjustable or non?
Adjustable
Fraud or error adjustments, adjustable or non?
Adjustable
Major business combination adjustable or not?
Non
Plan to discontinue operations, adjustable or non?
Non
Major disposal of asset, adjustable or non?
Non
Restructuring, adjustable or non?
Non
Ordinary share transactions, adjustable or non?
Non
Change in asset prices or foreign exchange rates, adjusting or non?
Non
Change in tax rates, adjustable or non?
Non
What must always be assumed about debtors?
They are always in financial difficulty so if they go bad it is an adjusting event
What is the journal entry for credit losses?
Dr. Credit loss P/L
Cr. Debtors (could be allowance)
What is the accompanying tax journal entry for bad debt?
Dr. SARS
Cr. Tax expense
How are the profits affected when a credit loss is am, taking into account the tax implications?
The profits will decrease with the difference between credit loss and tax deduction
If a bad debt is recorded, along with its tax implications, how would this affect SOFP?
- The current assets, trade and receivables, will decrease with bad debt amount
- Equity will decrease, retained earnings, by the amount between bad debt and tax expense
- Current liability, SARS or current tax, decreases by the tax amount
How is the SOCI affected if there was a bad debt along with tax implications?
- Expenses will increase by credit loss amount
- Tax expense will decrease by the tax expense amount
- Profits will decrease by inference between the above two amounts
What is e exception to the rule that debtors will always be bad?
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
Decrease in NRV is adjustable or non?
Adjustable
What is the journal entry for adjustment in NRV?
Dr. Cost of Sales
Cr. Inventory (or whatever asset decreased)
