Exercise 16.11 ★ ★ ★ ADJUSTING/NON-ADJUSTING EVENTS AFTER THE REPORTING PERIOD The fi nancial statements of Company N are authorised for issue on 12 February 2017 and the end of the reporting period is 31 December 2016. State whether each of the following material items would be an adjusting or non-adjusting event after the reporting period in the fi nancial statements of Company N. Give reasons for your answer.

(a) At 31 December Company N had recorded an overdue receivable from Company P at $25 000 because collection of the full amount of $40 000 was in doubt. On 16 January, a receiver was appointed to Company P. The receiver informed Company N that the $40 000 would be paid in full by 30 April 2017.

(b) On 24 January Company N issued corporate bonds for $1 000 000, with interest of 5% payable semiannually in arrears.

(c) Company N’s investments in listed shares are held-for-trading and measured at fair value, with gains and losses recognised in profi t or loss. As at 31 December, these investments were recorded at the market value at that date, which was $500 000. During January and February 2017, there was a steady decline in the market values of all the shares in the portfolio. By 12 February 2017 the market value of the investments had fallen to $400 000.

(d) Company N had reported a contingent liability at 31 December in respect of a lawsuit against the company by an employee who was injured during 2016. The case was not heard until the fi rst week of February 2017. On 11 February, the judge handed down her decision, against Company N. The judge determined that Company N was liable to pay damages and costs totalling $3 000 000.

(e) As in part (d), except that the damages and costs awarded against Company N were $50 million, leading Company N to place itself into voluntary liquidation.