DipIFR Syllabus C. Presentation and additional disclosures - IAS 10 Events After The Reporting Period - Past Papers ^{1 / 1}

Delta is an entity which prepares financial statements to 31 March each year. Each year, the financial statements are authorised for issue on 25 May. The following events have occurred which are relevant to the year ended 31 March 2017:

Event (c)
On 31 March 2017, Delta was owed $10m by entity Z. The amount was due for payment by 30 April 2017. Entity Z has been a customer for many years and has an excellent payment record. At 31 March 2017, there was no reason to suppose that entity Z would fail to pay the $10m owed to Delta by 30 April 2017. By 20 April 2017, entity Z’s going concern status was in considerable doubt. (5 marks)

Required:
Explain and state (where possible by quantifying amounts) how the three events would be reported in the financial statements of Delta for the year ended 31 March 2017.

Note: The mark allocation is shown against each of the three events above. You should assume that all amounts described here are material.

Delta is an entity which prepares financial statements to 30 September each year. The financial statements for the year ended 30 September 2016 are shortly to be authorised for issue. The following events are relevant to these financial statements:

(b) On 1 September 2016, Delta sold a product to Customer X. Customer X is based in a country whose currency is the florin and Delta has a large number of customers in that country to whom Delta sell similar products. The invoiced price of the product was 500,000 florins. The terms of the sale gave the customer the right to return the product at any time in the two-month period ending on 31 October 2016. On 1 September 2016, Delta estimated that there was a 22% chance the product would be returned during the two-month period. The product had not been returned to Delta by 15 October 2016 (the date the financial statements for the year ended 30 September 2016 were authorised for issue). On 15 October 2016, the directors estimated that there was an 8% chance the product would be returned before 31 October 2016. The directors of Delta considered that the most reliable method of measuring the price for this transaction was to estimate any variable consideration using a probability (expected value) approach. Exchange rates (florins to $1) are as follows:

– 1 September 2016 – 2 florins to $1.
– 30 September 2016 – 2·1 florins to $1.
– 15 October 2016 – 2·15 florins to $1.
– 31 October 2016 – 2·2 florins to $1.

(7 marks)

Required:
Explain and show how the three events would be reported in the financial statements of Delta for the year ended 30 September 2016.

Notes:
1. The mark allocation is shown against each of the three events above.
2. In explaining event (b), you do not need to consider the impact on inventory and cost of sales.

Delta is an entity which prepares financial statements to 31 March each year. Each year the financial statements are authorised for issue on 20 May. The following events are relevant to the year ended 31 March 2016:

Event (c)
On 1 June 2015, the spouse of one of the directors of Delta purchased a controlling interest in entity X, a long-standing customer of Delta. Sales of products from Delta to entity X in the two-month period from 1 April 2015 to 31 May 2015 totalled $800,000. Following the share purchase by the spouse of one of the directors of Delta on 1 June 2015, Delta began to supply the products at a discount of 20% to their normal selling price and allow entity X three months’ credit (previously entity X was only allowed one month’s credit, Delta’s normal credit policy). Sales of products from Delta to entity X in the ten-month period from 1 June 2015 to 31 March 2016 totalled $6 million. On 31 March 2016, the trade receivables of Delta included $1·8 million in respect of amounts owing by entity X. (5 marks)

Required:
Explain and show (where possible by quantifying amounts) how the three events would be reported in the financial statements of Delta for the year ended 31 March 2016.

Note: The mark allocation is shown against each of the three events above. You should assume that all amounts described here are material. When discussing event (a), you are not required to consider disclosure requirements.

Delta is an entity which prepares financial statements to 31 March each year. The financial statements for the year ended 31 March 2015 are to be authorised for issue on 30 June 2015. The following events are relevant to these financial statements:

(c) On 31 March 2015, the inventories of Delta included a consignment of components which Delta had been supplying to a number of different customers for some years. The cost of the consignment was $10 million and based on retail prices at 31 March 2015, the expected selling price of the consignment would have been $12 million. On 15 May 2015, a competitor completed the development of an alternative component which seems likely to make Delta’s consignment obsolete. The directors of Delta estimate that the consignment (all still currently unsold) will now be sold for only $2 million. (4 marks)

Required: 
Explain and show how the three events should be reported in the financial statements of Delta for the year ended 31 March 2015.

Note: The mark allocation is shown against each of the three events above.