Question 1

1. The financial statements of Transform Ltd are in the process of being finalized for the year ended 31 March 2018. Transform Ltd would like to present the financial statements for authorization for issue on 10 June 2018. Uncertainty still exists on the following matters 1. Transform Ltd determined during May 2018 that a debtor, Cent Ltd, which owed an amount of N$20 000 to Transform Ltd at 31 March 2018,is currently experiencing financial difficulties and will probably not be able to settle its debt. After further investigation it came to light that the problem had already existed for the past six months, but as Transform Ltd was unaware of this, the company continued granting credit to Cent Ltd. The result is that an amount of N$35 000 was owed by Cent Ltd at 31 May 2018.

2.Owing to a cloud burst during the first week in April 2018, the basement level of Transform Ltd's premises was flooded, resulting in the total destruction of the inventory stored there. The cost of this inventory, amounting to N$75 000, is included in the inventories figure in the financial statements at 31 March 2018. Transform Ltd was not insured.

3. A claim amounting to N$150 000 was instituted against Transform Ltd on 1 March 2018 arising from the terms of a product guarantee given by Transform Ltd on its products. On 10 June 2018 it is still not certain if the claim will be successful and the extent of the costs are also uncertain.

4. Transform Ltd has a debtor, Dot Ltd, which owed the company N$55 000 as at 31 March 2018. During April 2018 Dot Ltd's premises were destroyed by a fire, including all the assets and the accounting records. Dot Ltd was not insured and it appears that the company will not be able to settle any of its debts. At the time of the fire the outstanding amount according to Transform Ltd's records was N$64 000.

5. On 31 March 2018 Transform Ltd had 800 'Item 4' units on hand at a cost of N$16 000. During April 2018 Transform Ltd determined that half of the 'Item 4' inventory items on hand at 31 March 2018 had a defect due to a manufacturing error resulting from a problem encountered with Machine 1. The defective items can be sold for N$5 each and the costs to repair the machine will be N$15 000. Ignore the tax effects.

Required:

1. State, in each of the above cases, whether an adjusting or non-adjusting event occurred. In each case briefly discuss how the event will affect the financial statements for the year ended 31 March 2018.

2. Give reasons for the answers in each of the above cases. It is not necessary to give the disclosure concerning the date the financial statements were authorized for issue and who gave the authorization, as required by IAS 10. Your solution must comply with the requirements of International Financial Reporting Standards (IFRS)