Problem 1

On December 31, 2019, the board of Night School Group decided to close one of its divisions. On December 31, 2019, a detailed plan for closing the division was agreed to by the board, and letters were sent to customers and employees affected by this closure.

Required:

a) What is a restructuring? Provide two examples.

b) To ensure that the restructuring is valid, what two conditions must take place?

c) Possible costs that may be incurred during the restructuring are as follows:

1. Investment in new software as a result of closing the division,

2. cost of moving some assets of the closed division to other parts of the company,

3. Employee termination costs related to closing the division,

4. Expected future operating losses in closing the division, and

5. Onerous contract provisions related to the closing.

Indicate which (if any) of these costs may be part of a restructuring provision.

Thank you for your help