Amazing delights Ltd is a large distributor of confectionary goods. The company has large contracts to supply bakeries and corporate event coordinators throughout the country. The financial director and his staff are in the process of preparing the financial statements for the year ended 31 December 2019.

The following events took place between the end of the reporting period and the date of authorization of issue of the financial statements:
i. Confectionary in stock often pass their sale by date before they are sold and are left in the corner of the bakery. At the year-end stock count on 31 December 2019, some stale stock was inadvertently included in stock at their cost of N$5 000. They will never be sold by Amazing Delights Ltd.

ii. A customer, Bakers Inn Ltd, who owed N$100 000 at 31 December 2019 was declared insolvent on 15 January 2020 after its premises burnt down over the previous weekend. The premises were completely destroyed and were not insured.

iii. A burglary took place at Amazing delights’ premises on 2 January 2020 and flour and sugar to the value of N$10 000 was stolen. Such items are included in consumable stores.

iv. Amazing delights was served a legal action for delivering stale confectionary to an event coordinator who needed them for a government function that hosted foreign heads of state on 23 December 2019. The claim is for N$10 000. Amazing delights Ltd.’s lawyers believe that it is highly likely that Amazing delights Ltd will have to pay N$10 000.

The financial statements are authorized for issue on 20 January 2020

Required:
Discuss the accounting treatment of each of the events in (i) to (iv) above in the financial statements of Amazing delights in compliance with IFRS.

Answer rating: 100% (QA)

IAS 10 defines the subsequent events into two parts ie Adjusting and NonAdjusting events Adjusting e... View the full answer