Identify whether the situation will require adjustment or disclosure in the 2015 financial report. Explain why You

Identify whether the situation will require adjustment or disclosure in the 2015 financial report. Explain why
 

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You are now at the completion stage of the audit of RPL for the year ended 30 June 2015, with the auditor's report to be signed on 15 August 2015. On 10 August, while finalising the audit file, the following additional information has come to your attention. (ii)Fact or Fiction Ltd (Fact or Fiction) publishes very successful 'believe it or not' books. Fact or Fiction normally arranges a small initial paperback print run and then, if the book proves popular, arranges for an additional major hardcover print run. Fact or Fiction's new book UFO was released on 1 June 2015 and sold out within two weeks. Fact or Fiction faxed an additional order to RPL on 15 June 2015 for 10 000 hardcover copies of the book for urgent shipment. The copies were printed and shipped on 28 June 2015, together with a sales invoice for $600 000. On 3 July 2015, Fact or Fiction discovered that RPL had mistakenly printed the copies of the book in softcover rather than hardcover, as had been stipulated in its purchase order. Fact or Fiction insisted on an immediate reprint of the book in hardcover before it would pay the invoice. RPL admitted that it was their error and immediately agreed to reprint the copies in hardcover at their expense of $325 000. Based on the background material and the information above, identify and explain whether treating each situation independently (assuming other situations did not occur) will require adjustment or disclosure in the 2015 financial report, or require no amendment to the financial report. (11.28) You are now at the completion stage of the audit of RPL for the year ended 30 June 2015, with the auditor's report to be signed on 15 August 2015. On 10 August, while finalising the audit file, the following additional information has come to your attention. (ii)Fact or Fiction Ltd (Fact or Fiction) publishes very successful 'believe it or not' books. Fact or Fiction normally arranges a small initial paperback print run and then, if the book proves popular, arranges for an additional major hardcover print run. Fact or Fiction's new book UFO was released on 1 June 2015 and sold out within two weeks. Fact or Fiction faxed an additional order to RPL on 15 June 2015 for 10 000 hardcover copies of the book for urgent shipment. The copies were printed and shipped on 28 June 2015, together with a sales invoice for $600 000. On 3 July 2015, Fact or Fiction discovered that RPL had mistakenly printed the copies of the book in softcover rather than hardcover, as had been stipulated in its purchase order. Fact or Fiction insisted on an immediate reprint of the book in hardcover before it would pay the invoice. RPL admitted that it was their error and immediately agreed to reprint the copies in hardcover at their expense of $325 000. Based on the background material and the information above, identify and explain whether treating each situation independently (assuming other situations did not occur) will require adjustment or disclosure in the 2015 financial report, or require no amendment to the financial report. (11.28)

Answer rating: 100% (QA)

Because ASC 855 does not provide any bright line tests for determining which subsequent events require disclosure the decision regarding when to disclose a subsequent event is based on specific facts ... View the full answer