Give explanation based on Australian accounting Standards Board (AASB).

On 12 May 2023, the board of directors decided to close down a division making a particular product. On 28 May 2023 a detailed plan for closing down the division was agreed by the board; letters were sent to customers warning them to seek an alternative source of supply and redundancy notices were sent to the staff of the division. Some staff will be relocated, and the company will pay for relocation costs to relevant staff.    The lease on the old factory continues for the next four months until it is closed. Unfortunately, the lease cannot be cancelled, and the factory cannot be re-let to another user.   The costs associated with this shutdown are expected to be as follows: 

(a) Payout of staff annual leave $450,000.

(b) Redundancy payout $800,000.  (c) For those staff who will be moving to another division, retraining will be required at a cost of $500,000.

(d) As another division is located 200km from the division being closed down, National Ltd agreed to pay for the costs of relocating those employees to another division. 

(e) The lease on old factory has five years to run. The cost of terminating the lease is expected to be $300,000.

(f) The financial and management information systems of the division being closed need to be reconfigured to be comparable with another system, so that it can be used in the new division. This is estimated to cost approximately $1 million. 

(g) Expected loss due to closing down $979,000.  The above costs will be paid during August 2023. We are unsure whether we need to include the above costs in the 2023 annual reports. Please explain any disclosure requirements for such events as at 30 June 2023.

Answer rating: 100% (QA)

Solution The Australian Accounting Standards Board AASB provides guidance on the disclosure requirements for events that occur after the reporting per... View the full answer