Difficulty Level III McKeith McKeith Chapter 08 McKeith and

Difficulty level iii mckeith mckeith chapter 08

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Difficulty: Level IIIMcKeith - Chapter 08 #49McKeith Chapter 08
McKeith and Collins, Financial Accounting & Reporting, 2ndedition5. IAS 10 Events After the Reporting Period defines events after the reporting period as “those events, favourable and unfavourable, that occur between the end of the reporting period and the date the financial statements are authorized for issue”.Outline the requirements of IAS 10 and explain why this treatment is requiredin order to ensure that financial statements show a true and fair view and give appropriate information to the shareholders and other users.Basic answerShould first of all explain that the period between the end of the reporting period andthe date the accounts are authorized for issue may resolve or determine any uncertainties that may have existed at the year end. In addition, new information may come to light which is significant and which may affect users’ decisions.Definitions of adjusting and non-adjusting events should be given together with examples of each. The accounting treatment of adjusting and non-adjusting events should be explained.The disclosure requirements of IAS 10 should be summarized.The purpose is to ensure that the financial statements show the true position at the year end.All information available to management at the date the accounts are approved for issue should be taken into account.To the extent that such information relates to conditions existing at the end of the reporting period, the financial statements should be adjusted.To the extent that material matters relate to the subsequent period, these should be disclosed by way of note so that users can make proper evaluations and decisions.Good answer
McKeith and Collins, Financial Accounting & Reporting, 2ndeditionIAS 10 does not specifically state that the financial statements should be adjusted toreflect only material items but this is implied by the materiality principle established inthe IASB Framework.If a company is likely to liquidate or cease trading then it is not appropriate to prepare the financial statements on the going concern basis.Discussion of dividends proposed not being recognized.Difficulty: Level IIMcKeith - Chapter 08 #50McKeith Chapter 08

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