ABR Limited recently issued annual financial statements for the year ended $31$ December

Below is a timeline of events leading up to the issue of the AFS.

$2\mathrm{.}1.$ What is the last relevant date for the consideration of the Events After Reporting Period

of the issued financial statements taking into account the above timeline?

$(2)$

$2\mathrm{.}2.$ Crown Limited is currently issuing its financial statements for the year ended $30$ June

The directors authorized the issue of financial statements to shareholders in a meeting

on the $31$ August $2023.$

Consider the impact $($if any$)$ of the following events after the reporting period on the financial

statements of Crown Limited for the year ended $30$ June $2023$ assuming they have not

already been accounted for:Please note: definitions and recognition criteria of the elements $($as per the

Conceptual Framework$)$ do not need to be stated.

a$)$ A final dividend of $0\mathrm{.}5$ cents per share for the current year end was announced by the

Board of Directors, in a meeting held on $11$ July $2023.$

How should the final dividend be accounted for in the financial statements for the

year ended $30$ June $2023?$

b$)$ On the $15$ June $2023,$ a customer had sued Crown Limited for damages that he claims to

have suffered as a direct result of faulty goods supplied to him by Crown Limited.

On the $30$ June $2023,$ the litigation was in process and the Court had not reached a verdict.

The Company's legal advisors suggested that the chance of an adverse opinion against

Crown Limited was very low as the contract with the customer explicitly states that the

company shall not be liable to such claims. Consequently, no liability was recognized in the

financial statements and neither was the contingency disclosed.

On $29$ August $2023,$ the court issued a verdict against Crown Limited and ordered the

payment of damages amounting R$2\mathrm{.}5$ million to the claimant within $30$ days.

The CFO is of the view that the financial statements need not be adjusted because the

obligation to pay damages to the customer arose after the year end upon the decision of the

court.

How should the liability for payment of damages be accounted for in the financial

statements for the year ended $30$ June $2023?$

Is the argument of the CFO valid and why?

c$)$ During July $2023,$ Crown Limited suffered losses on their sales. Crown Limited had to

reduce the prices on their items due to an unexpected launch of similar $($but better$)$

products by their competitor on the $30$ June $2023.$

The CFO is of the view that because the sales were transacted after the year end, the

associated loss should be recognized in the next accounting period in line with the matching

principle.How should the decrease in inventory prices be accounted for in the financial

statements for the year ended $30$ June $2023?$

d$)$ TMZ Limited who is currently a customer of Crown Limited, was declared bankrupt on

the $6$ July $2023.$ This was due to a deteriorating liquidity position after the withdrawal of

financial support by its bank over the past $3$ months.

Crown Limited was owed a material amount by TMZ Limited as at $30$ June $2023$ which will

not be recoverable.

How should bankruptcy of the customer be accounted for in the financial statements

for the year ended $30$ June $2023?$

e$)$ Crown Limited suffered great losses due to damages caused to its factories and other

business premises. This was due to a major earthquake experienced on the $25$ July

Crown Limited's insurance policy does not cover the risk of loss arising from natural

disasters. There are insufficient internal funds or the availability of external finance to rebuild

the infrastructure necessary for it to resume its business operations. As a result, Crown

Limited is unlikely to operate as a going concern in the foreseeable future.

How will the change in going concern status of Crown Limited be reflected in its

financial statements for the year ended $30$ June $2023?$

END OF QUESTIONS