Q6.

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You are the financial controller of Omega, a listed entity involved in the exploration for and evaluation Omega's directors has raised some queries following his review of the consolidated financial stateme September 20X5. The following exhibits, available on the left-hand side of the screen, provide information relevant to t 1. 2. 3. Exploration and evaluation assets. Events after 30 September 20X5. Use of IFRS Standards. This information should be used to answer the question requirement within the response option pro When I looked at our financial statements, I saw a note which gave a breakdown of our exploration and evaluation assets. I compared it with that of a competitor and I have the following three questions. First, both notes showed the breakdown of the exploration and evaluation assets figure into various categories but they are not presenting the same categories despite both companies operating in similar ways. How can this be right when both companies use IFRS Standards to prepare their financial statements? Second, why does neither company include the costs of developing mineral resources as part of the exploration and evaluation assets figure? As a key part of both of our businesses, should these costs not be recognised as part of this figure? Finally, the financial statements state that we measure our exploration and evaluation assets using the cost model while the competitor's state they use the revaluation model. Is this an acceptable inconsistency when both companies are preparing financial statements in accordance with IFRS Standards? When I read two notes to our financial statements, they seemed to contradict each other. One of the notes referred to a legal case from December 20X4 in which we were being sued for damages by a customer. We originally thought Omega would have to pay damages of $5 million but the case was finally settled for $5-5 million on 20 October 20X5. The financial statements at 30 September 20x5 presented a liability for $5-5 million, despite this only being confirmed after the year end. A second note referred to the major fire in one of our factories on 15 October 20X5. The damage caused to the factory is estimated at $5-75 million. However, the note says that no adjustments have been made to the amounts recognised in the financial statements for the year ended 30 September 20X5 in respect of the damage caused by the fire. This will have a significant, but temporary impact on the cash flow of the business, however, it will not cause our own going concern status to be in doubt. The two events are not being treated consistently despite the financial amounts being similar Please can you explain these apparent inconsistencies? I am aware that a major customer, owing us a significant amount, became insolvent on 20 November 20X5. We are unlikely to recover much, if any, of this debt. Why don't the financial statements contain at least a note explaining to our shareholders what has happened? I am aware that the financial statements were authorised for issue on 15 November 2005. You will know that we acquired a new subsidiary, Epsilon, on 1 October 20X4. Epsilon has a year end of 30 September and has prepared financial statements using national accounting standards, not IFRS Standards. Now that they have become part of the Omega group, we will of course require them to use IFRS Standards. We have incorporated their results into our consolidated financial statements using IFRS Standards but Epsilon needs to know what to do in its own financial statements. They have the IFRS Standard compliant financial statements for the year ended 30 September 20X5 but what about the comparative figures? Can they use the financial statements for their year ended 30 September 20X4, prepared under the national accounting standards, as comparative figures for their 20x5 financial statements? Please let me know how to advise the financial controller of Epsilon. Provide answers to the queries raised in Exhibits 1 - 3 relating to the consolidated financial statements for the year ended 30 September 20X5. These financial statements were authorised for issue on 15 November 20X5