Review Questions on IAS 10 Events after reporting period.

1. The preparation of the financial statements of Excellent Company for the accounting period ended December 31, 2018 was completed by the management on March 15, 2019. The draft financial statements were considered at the meeting of the board of directors held on March 20, 2019, on which date the board approved them and authorized them for issuance. The annual general meeting (AGM) was held on April 10, 2019, after allowing for printing and the requisite notice period mandated by the corporate statute. At the AGM the shareholders approved the financial statements. The approved financial statements were filed by the company on April 20, 2019.

Required

Given these facts, what is the“ authorization date” in terms of IAS 10? Explain.

2. During the year 2018, Tazan Company was sued by a competitor for GHS15 million for infringement of a trademark. Based on the advice of the company’s legal counsel, Tazan Company accrued the sum of GHS10 million as a provision in its financial statements for the year ended December 31, 2018. Subsequent to the reporting date, on February 15, 2019, the Supreme Court decided in favor of the party alleging infringement of the trademark and ordered the defendant to pay the aggrieved party a sum of GHS14million.

The financial statements were prepared by the company’s management on January31, 2019, and approved by the board on February 20, 2019.

Required

Should Tazan Company adjust its financial statements for the year ended December 31, 2018? Explain

3.  XYZ Company carried a provision of GHS200,000 in its draft financial statements to 31 March 2019 in relation to an unresolved court case.  On 27 April 2019, when the financial statements to 31 March 2019 had not yet been authorized for issue, the case was settled and the court decided the final total damages payable by XYZ to be GHS280,000.  According to IAS 10,what should be the accounting treatment in relation to this event?

4. A new drug named “AFA” was introduced by Kinadrug Company. in the market on December 1, 2018. Kinadrug’s financial year ends on December 31, 2018. It was the only company that was permitted to manufacture this patented drug. The drug is used by patients suffering from an irregular heartbeat. On March 31, 2019, after the drug was introduced, more than 1,000 patients died. After a series of investigations, authorities discovered that when this drug was simultaneously used with “ANFA”, a drug used to regulate hypertension, the patient’s blood would clot and the patient suffered a stroke. A lawsuit for GHS100,000,000 has been filed against Kinadrug Company. The financial statements were authorized for issuance on April 30, 2019.
5. What isthe appropriate accounting treatment for this post-reporting event under IAS 10?

5. Dadie company’s draft financial statements show the profit before taxation for the year to 31 December 2015 as GHS9million.  The board of directors is to authorize the financial statements for issue on 20 March 2016.  A fire occurred at one of Dadie’s sites on 13 January 2016 with resulting damage costingGHS7 million, only GHS4 million of which is covered by insurance.  The repairs will take place and be paid for in April 2016.  The GHS4 million claim from the insurance company will however be received on 14 February, 2016.  Taking account of these events in accordance with IAS 10,
6. what should be Dadie’s profit before taxation in its financial statements? Show all Workings.