MAY 2015 SKILLS LEVEL EXAMINATIONS

QUESTION 7

a. There is usually a lead time between the end of an entity’s accounting

year and when the financial statements are approved and signed off
by the directors. In between this period, there are two types of events
according to IAS 10-Events After the Reporting Period, which may
require consideration when preparing financial statements.

You are required to:

Identify and explain these events and state how they are treated in the
financial statements.
(4 Marks
)

b. Company A is indebted to company B to the tune of N50,000,000.

The financial year-end of company B is 30 June, 2014. On 30 July
2014, company B received a letter from a liquidator advising it that
company A has gone into insolvency. The letter revealed that
company A ceased operations a month ago and that company B is only
likely to receive a liquidation dividend of 20k for every naira owed by
company A. It is the normal practice of company B’s board to
approve the audited financial statements three months after the
financial year end.
Required:

i. Explain how the above transactions should be treated in the financial

statements of company B in accordance with IAS 10-Events After
The Reporting Period.
 (2 Marks)

ii. Prepare journal entries that are required to adjust company B’s
financial statements to account for the above event. (2 Marks)

iii. State what would have been the treatment in the financial statements
assuming it was fire that destroyed company B’s factory building on 30
July, 2014. (3 Marks)

c. The directors of XYZ Plc declared that a dividend of N1 per ordinary

share be paid to shareholders on the company’s register as at 15 April,
2014. The financial statements were approved by the company’s
board on 30 May, 2014. The shareholders, at the company’s annual
general meeting held on 15 June, 2014, approved the payment of the
dividend to eligible shareholders on 1 July, 2014.

Required:
Explain how the dividend proposed by the Directors should be treated in
the financial statements of XYZ Plc in accordance with IAS 10.
(4 Marks)
(Total 15 Marks)
NOVEMBER 2020 DIET

QUESTION 3

a. IAS 10 on events after reporting period has two main objectives:

• To specify when a company should adjust its financial
statements for events that occur after the end of the reporting
period; and
• To specify the disclosure that should be given about events that
have occurred after the end of the operating period but before
the financial statements were authorised for issue.

Required:
Discuss the following key concepts
under IAS 10:
i. Event after reporting period
ii. Adjusting events
iii. Non-adjusting events (6 Marks)

b. The following events took place in Chakachaka Company Nig.

Limited:

(i) Shortly after the financial year ended on June 30, 2018 but
before the financial statements were authorised for issue,
Chakachaka Nigeria Limited‟s inventory was destroyed by a
fire outbreak which resulted in a loss of N200 million.

(ii) The company‟s financial year that ended June 30, 2018
shows an amount of N60million that is due from one of its
debtors, Mr. Onigbese. Chakachaka Nigeria Limited
 provided for impairment at June 30, 2018 of N15million
against the gross value of N60million due from Mr.
Onigbese. On July 31, 2018 before the financial statements
were authorised for issue, Mr. Onigbese was declared
bankrupt and unable to pay the debt.

(iii) Chakachaka Nigeria Limited was sued on June 30, 2018 but
the judgment was only handed down on July 21, 2018. The
Company was found liable for damages and cost amounting
to N31million were awarded against it. On July 22, 2018,
Chakachaka Nigeria Limited filed a claim with its insurers
and on July 29, 2018, it was notified that the insurer would
only cover N26 million of the loss.

Required:
Prepare a brief memorandum advising the directors of Chakachaka
Nigeria Limited. on the accounting treatment and/or disclosure
required as a result of the events in
(i) to (iii) after the reporting date. (14 Marks)

(Total 20 Marks)