Page 472 - F1 Integrated Workbook STUDENT 2018

Chaptter 25

Notees to financial statemments (extrract)
Somme productts that had been soldd during 200X0 had beeen incorreectly includded
in innventory att the year-eend 31 December 200X0 amounnting to $6,,500. The
financial statements for tthe year ennding 31 DDecember 20X0 havee been
resttated to correct this eerror.

Expplanatory note:
Thee correctionn is made aas follows:

Dr ccost of salees (closing inventory)) $6,5000
Cr innventory $6,5000

Thiss happens in the 20XX0 accountts and has a knock-on effect onn the opening
inveentory of 200X1.

Thee adjustment to 20X1 opening rretained eaarnings is nnet of tax.

Exxampple 6

Shoortly after the reportinng date, 311/12/X0, a major creddit customeer of an enntity
wennt into liquiidation andd it is expeected that liittle or none of $12,0000 debt wiill
be rrecoverablle. $10,0000 of the deebt relates tto sales made beforee the year
endd.
In thhe 20X0 finnancial staatements thhe whole oof the debt has been written off but
onee of the direectors has pointed ouut that, as the liquidaation is an e event afterr
the reporting ddate, the ddebt shouldd not have been writtten off but disclosuree
madde by a noote.
Advvise whethher the dirrector is ccorrect.
Solution

Thee liquidation of the cuustomer is treated as an adjusting event. OOnly $10,0000
debbt existed aat the reporting date.
Undder IAS 10 only the eexisting debbt should bbe written ooff in the 220X0 financcial
stattements. TThe remaining $2,0000 did not exxist at the reporting ddate and
shoould be writtten off in tthe 20X1 fiinancial staatements.

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