You are the audit partner on the audit of Australian Water Purification Limited (AWP) for the year ended 30 June 2018. AWP designs and constructs water purification plants and equipment to convert sewage into drinking water.

In December 2017, AWP acquired a 100 per cent shareholding in Crystal Lake Water Ltd (CLW), one of the largest producersand distributors of bottled mineral water in Australia, with contracts with all the major supermarket chains and liquor stores in Australia.

It is now late August 2018 and, while finalising the audit for AWP and its newly purchased subsidiary, CLW, you come across the following information before signing the auditor's report:

1. The standard customer contract contains a clause allowing cancellation if CLW's ownership changes within a specified period (expiring August 2018). A few of CLW's major customer contracts (representing approximately 30 per cent of the company's revenue for the last year) have been cancelled since year end.
2. Heavy rain and subsequent floods during late July 2018 have seeped into the underground water table in western Victoria and contaminated one of the major sources of CLW's mineral water supply. This will cut CLW's production by almost 50 per cent for the next three to four months unless an alternative supply is established.

For each situation above, you have no concerns other than those described, and going concern is not an issue.

Required

Considering each situation independently, explain the impact, if any, of the item on the consolidated financial report for the year ended 30June 2018