Question
EXHIBIT 2 A new accountant has recently joined Tasty. The accountant noticed that the provisions balance for the 2023 financial year-end is substantially higher than
EXHIBIT 2 A new accountant has recently joined Tasty. The accountant noticed that the provisions balance for the 2023 financial year-end is substantially higher than that of 2022. After enquiring, it has come to the accountants attention that the increase is due to suspected legal requirements, to come into effect in 2024, to train staff in the consumer industry. The training is expected to commence once the requirements are enacted at an amount of $4 million. Furthermore, the board of directors have discussed a potential restructure of Tasty. The restructuring plans included an analysis of long term cost savings but, should the restructure go ahead, there will be substantial short term costs as well. These include, professional fees, penalties for cancelling leases and also redundancy costs for some employees. Even though Tasty might not restructure their business, further plans will need to be made to ensure Tasty remains a going concern. For this reason, the finance director has included a restructuring provision, arguing that this is prudent. A final decision and announcements to staff and lessors are likely to be made prior to authorisation of the financial statements which is expected to be in March 2024. When the new accountant probed further into the recording of provisions, he was abruptly dismissed. The director threatened that should the accountant question his decisions, he could be dismissed from his position. The directors of Tasty receive bonuss on an annual basis based on actual profits exceeding projected profits. In the past few years, the entity has exceeded projected profits, however, in the years to come this may not be the case due to the going concern issues the entity is facing. (i) Discuss the accounting implications of Tastys provisions. Your discussion should include the implications should the announcement be made to staff and lessors.
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