FINANCIAL ACCOUNTING 5

DPA 50143
CASE STUDY

DAT5A
(SESSION 1 2022/2023)

PREPARED BY:
WENOW A/L MONG KUN (16DAT20F1012)
NUR AYUNI KHALIDAH BINTI KAMARUDDIN (16DAT20F1030)
SITI BALQIS BINTI DANIYAL (16DAT20F1050)
NORHAZEERAH BINTI MUSTAFFA (16DAT20F1058)

SUBMITTED TO:
MADAM NOOR HAZINI BINTI AB HALIM
ANSWERS:

QUESTION 1

Adjusting events is those that provide evidence of conditions that existed at the end of the
reporting period. Entity shall adjust the amounts recognized in its financial statements to reflect
the adjusting events.

Non-adjusting events is those that are indicative of conditions that arose after the reporting
period. Disclose the nature of the event and an estimate of the financial impact in financial
statements or a statement if such an estimates or a statement if such an estimate is not
possible.

QUESTION 2

a) Non-adjusting Events

The destruction of the warehouse by fire is a non-adjusting event after the end of the
reporting period. The entity does not adjust the amounts recognised in its financial
statements. However, it must give additional disclosure to the nature of event and financial
statements effects of the event and the estimate loss of RM 32 million in the notes of
financial statement.

b) Adjusting Events

Company needs to adjust the inventory and the profit downwards in the financial statement
of the year 2021. The sale of inventories after the end of the reporting period may give
evidence about their selling price at the end of the reporting period for the purpose of
assessing impairment at that date. The entity must record RM 84,000 as commission
expenses in the financial statement with a corresponding increase in profit for the year
2021.

c) Non-adjusting Events

Company needs to disclose the nature of business and the financial effect of the event in
the notes of financial statements because it changes in tax law. The Government need to
record an additional tax expenses and tax liability of RM 960,000 in the financial statement
year 2021.
QUESTION 3

From the statement above, it shows that this is an adjusting event. That means the entity may
recognise a contingent liability. If the court case is settled after the reporting period but before
the authorization of the financial statements for issues, the adjustment to the provision
previously recognised has to be done. IAS 10 requires the result of a court case after the
reporting date to be taken into consideration to determine whether a provision should be
recognised in accordance with IAS 37, Provisions, Contingent Liabilities, and Contingent
Assets, at the year-end. The condition of liability in damages existed at the end of the reporting
period. Therefore, the entity must measure its liability at RM 5 million in the statement of
financial position for the year 2020. The situation is very low because the contract with the
customer clearly states that the company will not be responsible for such claims. As a result,
no liability is recognized in the financial statements and contingencies are not disclosed.