You are now at the completion stage of the audit of RPL for the year ended 30 June 2015, with the auditor's report to be signed on 15 August 2015. On 10 August, while finalising the audit file, the following additional information has come to your attention.

(i) On 10 June 2015, RPL placed an order with one of its Asian suppliers for $50 000 worth of high quality paper for a glossy publication to be printed in July 2015. The order of paper was shipped on 15 June 2015 but, due to severe storms, the ship carrying the paper ran aground in Indonesia. On 30 June 2015, salvage experts were still unable to say when the ship could be removed or its cargo unloaded, although it was expected that the paper would have suffered severe water damage, and it was uninsured.

(ii) For the past five years, the College of Forensic Investigation (CFI) has ordered the printing of 50 000 copies of its monthly magazine from RPL at a cost of $600 000. RPL's profit margin on the printing of these magazines is $7 each. The yearly contract is cancellable by CFI on seven days' notice.

On 15 June 2015, CFI announced that it was investigating merging with the International Institute of Fraud Investigators. As part of the merger proposal, the magazines of the two entities will be combined and will be available only by online download from the new combined website. The CFI board has informed RPL that the contract for the printing of the monthly magazine will be cancelled if the merger goes ahead.

On 15 July 2015, CFI advised RPL that the merger agreement had been signed and that it was cancelling its order for 50 000 magazines for the next 12 months.

(iii) Fact or Fiction Ltd (Fact or Fiction) publishes very successful 'believe it or not' books. Fact or Fiction normally arranges a small initial paperback print run and then, if the book proves popular, arranges for an additional major hardcover print run. Fact or Fiction's new book UFO was released on 1 June 2015 and sold out within two weeks. Fact or Fiction faxed an additional order to RPL on 15 June 2015 for 10 000 hardcover copies of the book for urgent shipment. The copies were printed and shipped on 28 June 2015, together with a sales invoice for $600 000. On 3 July 2015, Fact or Fiction discovered that RPL had mistakenly printed the copies of the book in softcover rather than hardcover, as had been stipulated in its purchase order. Fact or Fiction insisted on an immediate reprint of the book in hardcover before it would pay the invoice. RPL admitted that it was their error and immediately agreed to reprint the copies in hardcover at their expense of $325 000.

Based on the background material and the information above, identify and explain whether treating each situation independently (assuming other situations did not occur) will require adjustment or disclosure in the 2015 financial report, or require no amendment to the financial report. (11.28)

a) Identify whether treating each situation independently (assuming other situations did not occur) will require adjustment or disclosure in the 2015 financial report, or require no amendment to the financial report.

b) Explain the reasons for your answer in question (a).

Loss of shipment of paper (inventory stock)

Loss of major customer

Reprinting of book due to incorrect cover