Model Paper 3 solution new.pdf - Question 1(IAS 10 and 37 1...

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Question 1: (IAS 10 and 37) 1. Fraud: 2. Legal proceedings 1. the conditions existed at the year-end 3. Loss of Customer: Question 2: Monetary Iterms: Group: Parent and its subsidiaries Parent: An entity that controls one or more entities. Subsidiary: An entity that is controlled by another entity. Question 3: IAS 41 Reconciliation Opening balance 16,000,000 (40 x 400,000) 18,000,000 (60 x 300,000) 34,000,000 Fair value gain: New Born 2,500,000 (10 x 250,000) 2- year old 4,000,000 (100,000 x 40) 3- year old 21,000,000 (350,000 x 60) New Born Fv gain 1,250,000 (10 x 125,000) 28,750,000 Organic Gain: 2- year old 6,000,000 (150,000 x 40) 3- year old 6,000,000 (100,000 x 60) New Born 500,000 (50,000 x 10) 12,500,000 Closing 3- year old 26,000,000 (650,000 x 40) 4- year old 45,000,000 (7500,000 x 60) Half year old 4,250,000 (425,000 x 10) 75,250,000 2- year old Clearly the fraud committed by the payables ledger clerk has been ongoing during, and beyond the financial year. Fraud, error and other irregularities that occur prior to the year-end date – but which are only discovered after the year-end – are adjusting items, and therefore the financial statements would require amendment to take account of the fraudulent activity up to the year-end. At the year-end, the company had made disclosure of a contingent liability. However, subsequent to the year-end (29 October 2010), the court found the company liable for breach of contract. The legal proceedings were issued on 20 September 2010 (some 10 days before the year-end). This is, therefore, evidence of conditions that existed at the year-end. IAS 10 requires the result of a court
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