You are employed as a financial reporting consultant for a large supermarket chain called Pipers plc with a year end of 31 August 2022. You have received the following email from them asking for advice. Hello, There are a couple of financial reporting issues that I need to ask your help on as to how to account for them. Can you have a look at them and reply with figures/adjustments needed a full explanation of why?

The following information is relevant:

Receipt of a Government Grant.

On 1 September 2020 we changed our air conditioning system in all its stores for a new more environmentally friendly model in all our stores. This energy saving move qualified for a government green grant to help fund the new system. The cost of the new systems in all stores was 20,000,000, and the green grant received towards this was 10,000,000. The air conditioning system is expected to have a useful life of 10 years with no residual value. We want to consider all options of accounting for the grant. Also we would like to know how treatment of a Government Grant differ had we been following UK GAAP.

Litigation

In August 2022 there was a receipt of legal action from a customer who had been injured by one of our phones going on fire. Based on previous similar cases its the opinion of our lawyers its likely we will lose the court case. In such an event there is a 20% chance we will have to pay damages of 200,000 and an 80% chance we will have to pay out 500,000. However as the fault was partly caused by an error by a supplier its probable well be able to successfully pursue a counter claim for 80% of any damages suffered.

Earnings Per Share

We made a number of share issues in the year and so are unsure how to calculate earnings per share (EPS) and effect on prior year comparative. As of 1 September 2021, we had in issue 2,000,000 1 ordinary shares. On 1 December 2021 we made a 1 for 5 rights issue of 5.52 a share, at this date the market rate was 6.00 a share. Then on 1 June 2022 made an ordinary issue of 1,000,000 1 shares at 6.50 per share. Profit attributable to ordinary shareholder in the year ended 31 August 2022 was 1,296,000 EPS for year ended 31 August 2021 was 43.2p per share. There had been no other share issues prior to this for a number of years

Requirement

Reply to the email from the client, providing an explanation of the accounting and reporting treatment and where relevant any calculations required.