ACC206:

The following are mutually exclusive scenarios.

(a) During 20X2, a Singapore-incorporated company, JK Pte Ltd, discovered that the inventory as stated in the published 20X1 Statement of Financial Position was overstated by $150,000. JK Pte Ltd uses a periodic inventory system and the First-In-First-Out cost method. Discuss and determine the accounting treatment of this overstatement in JK Pte Ltd's books based on FRS 8 Accounting Policies, Changes in Accounting Estimates and Errors. (6 marks)

(b) The draft financial report of LM Pte Ltd for the year ended 31 December 20X1 was completed on 12 March 20X2. On 23 March 20X2, the board of directors reviews the financial report and authorises it for issue. LM Pte Ltd announces its profit and other selected financial information on 3 April 20X2. The financial report is made available to shareholders and others on 4 April 20X2. The shareholders approve the financial report at their annual meeting on 2 June 20X2 and the approved financial report is then filed with the regulatory body on 11 June 20X2. The objective of FRS 10 Events after the Reporting Period is to prescribe the treatment of events that occur after an entity's reporting period has ended. With reference to the above scenario, explain what are "Events after the reporting period" and how these events should be accounted for. (6 marks)