The Company BEONE SAL is a Lebanese joint stock entity, registered at the Lebanese commercial court in 1975 in Beirut under number 7546773487A1. The company major business activity is importing and selling fast moving consumer goods (FMCGs) as whole seller to the Lebanese supermarkets. The company has its own warehousing facilities in Beirut and its own transportation fleet. The statement of financial position of the company as of December 31st 2019 reported the following figures. C/V 000’ Lebanese Pounds Assets Cash at hand 53,000 Cash at banks 3,250,750 Investment in Lebanese Republic Bonds 18,000,000 Trade accounts receivables 7,500,000 Inventory 2,500,000 Other Receivables 325,000 Property, Plant and Equipment 1,575,000 Total Assets 33,203,750 Liabilities Due to banks-Overdrafts 3,500,00 Due to Suppliers 1,500,000 Other payables 453,000 Total Liabilities 5,453,000 Equity Capital 1,000,000 Reserves 33,000 Retained Earnings 18,967,000 Net income for the year 7,750,750 Total Equity 27,750,750 The situation The Lebanese economy continues to be negatively impacted by the ongoing political tension in the region, the downgrade of sovereign credit risk rating as well as similar downgrade of certain local banks which are rated, uncertainties associated with access to foreign currencies, capital flow and free outflow of movement of funds, difference between prevailing official and market exchange rates, the default of the Lebanese Government on paying the balance of $ 1.2 billion sovereign debt due by March 9, 2020, and the recent business disruption due to the pandemic Corona Virus. Given all of the above, The company’s management are unable to determine if there is any additional adjustments which may be necessary to the carrying values of captions listed above as of December 31st ,2019 and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended. Moreover, 1 Cash at bank reported as of December 31st, 2019 included an amount of US Dollars 2,000,000 placed with a local bank for 3 months period earning 8% interest. 2. Investment in Lebanese republic bonds represents bonds maturing in year 2025 issued by the Lebanese government in US Dollars – Eurobond, holding 10 % annual interest. Moody’s recent downgrading of Lebanese sovereign debts had an impairment impact on Lebanese Eurobonds of 50%. 3. Trade receivables includes as of December 31st, 2019 balances due from 4 clients for around $ 1.2 million who closed business during 2020 and filed bankruptcy further to the bad economic conditions in Lebanon and business disruption. 4. Given the recession the country has been through, some goods were not sold before expiry date and remained in the company’s warehouse, expired. Their total cost is $ 500,250. 5. Due to banks represents overdrafts in US dollars with maturity year end 2020. 6. For reporting purposes, all monetary amounts in foreign currency have been translated into Lebanese Pounds at year end at the official closing rate published by the central bank of Lebanon (for US Dollars = 1,507.5 Lebanese pounds). Requirements Management has requested from your firm, being expert in financial and accounting reporting to assist them to address the accounting issues and treatments which might be arising out the above-mentioned events and their impact on the company’s financial statements as of December 31st, 2019, and the company operations as a whole. You will be granted a 15 minutes presentation to explain to the management your point of view and the adjustments which might be needed to the financial statements of the company as of 31st, December 2019 and your basis for conclusion including any references to international financial reporting standards ( IFRS) or financial reporting conceptual framework and any other reporting or additional disclosure issues needed in this regard.

Answer rating: 100% (QA)

1 The company should adjust the carrying value of its cash and cash equivalents downward by 2 millio... View the full answer