IAS 10 - Events After the Reporting Period defines the treatment to be given to events arising after the statement of financial position date but before the financial statements are approved by the Board of Directors.
Required
a. Define the terms 'adjusting events after the reporting period' and 'non-adjustment events after the reporting' as they are used in IAS 10.
b. Consider each of the following four events after the reporting period. If you think the event is an adjusting one, show exactly how items in the financial statements should be changed to allow for the event. If you think the event is non-adjusting, write a suitable disclosure note, including such details as you think fit. You may assume that all the amounts are material but that none is large enough to jeopardize the going concern status of the company.
i. The company makes an issue of 100,000 shares that raises £180,000 shortly after the statement of financial position date.
ii. A legal action brought against the company for breach of contract is decided, shortly after the reporting period, and as a result the company will have to pay costs and damages totalling £50,000. No provision has currently been made for this event. The breach of contract concerned occurred within the reporting period.
iii. Inventory included in the financial statements at cost £28,000 was subsequently sold for £18,000.
iv. A factory in use during the reporting period and valued at £250,000 was completely destroyed by fire. Only half of the value was covered by insurance. The insurance company has agreed to pay £125,000 under the company's policy.