Question

In its 2005 annual report, IBM disclosed the following subsequent events:
• On February 15, 2006, the company completed the acquisition of Micromuse for approximately $875 million. Micromuse is a publicly traded software com pany that provides network management software. The acquisition will be integrated into the company's software segment.
• On January 23, 2006, the company completed the sale of one of its real estate holdings in the United States for approximately $18 million. The company had previously recorded an impairment change because it had classified this prop erty in the fourth quarter of 2005 as an asset held for sale for approximately
$103 million and had recorded this asset in Other Income and as an expense in the consolidated statement of earnings.
• On January 31, 2006, the company announced that the board of directors had approved a quarterly dividend of $0.20 per common share payable March 10, 2006, to shareholders of record on February 10, 2006.
a. Are these type I or type II subsequent events? Explain your answer. The date of the audit report was February 28, 2006. IBM's year-end was December 31, 2005.
b. Why were these events disclosed in IBM's annual report?
c. How did the auditors gather evidence to verify the accuracy of these events?



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  • CreatedJanuary 22, 2015
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