(a) Summary of uncorrected misstatements
In general up to 1 mark for each point of explanation and up to ½ mark for each appropriate calculation:
– Obtaining an understanding of management’s reasons
– Encourage management to amend all misstatements
– Communicate effect of misstatements to those charged with governance
(i) Impairment
– Explanation of original calculation
– Inappropriate estimates used
– Revised impairments
– Justification of the proposed adjustment
– Request further clarification at meeting
– Matter is material individually
(ii) Borrowing costs
– Capitalisation rules
– Qualifying asset
– Identification of incorrect treatment of interest costs
– Explanation of adjustment
– Not material individually
(iii) Cleveland
– Liquidation is indication of further impairment
– Adjusting event after the reporting period
– Need to write off remainder of outstanding balance
– Request evidence of any further correspondence
– Not material individually
(iv) Nebraska
– Need to revalue investment to fair value at year end
– Calculation of fair value (½ max) and adjustment (½ max)
– Gain taken to statement of profit and loss
– Not material individually
Maximum marks 14