The directors of ABC Ltd. are revieweing the company’s draft financial statements for the year ended 31st March, 2017. The following material matters are under discussion:
1. After the Balance Sheet date one of the company’s factories was seriously damaged by fire. Insurance only covered part of the loss suffered. The company’s going concern status is not affected.
2. One of the company’s buildings was revalued during the year. The directors are uncertain as to how the revaluation surplus should be included in the financial statements. The surplus has been separately disclosed as an item in the draft income statement.
3. One of the company’s directors was dismissed during 2016 for disclosing confidential information to a competitor. ABC Ltd. has started an action against this director, and the company has been advised that it is probably that the substantial damage will be awarded.
4. ABC Ltd. guaranteed the overdraft of another company in 2016. No disclosure has been made in previous financial statements but events in the latter part of the year ended 31st March, 2017 suggest that it is probable that a liability will fall on ABC Ltd. in 2016. Explain how the above matter should be dealt with in the financial statements for the year ended 31st March, 2017.