Vespa Ltd is a listed company whose financial statements were authorised for issue on 2 October 20.7.

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Question:

Vespa Ltd is a listed company whose financial statements were authorised for issue on 2 October 20.7. The following note has been extracted from the financial statements of the company for the year ended 30 June 20.7:

VESPA LTD NOTES FOR THE YEAR ENDED 30 JUNE 20.7
17. Events after the reporting date
17.1 On 15 August 20.7 the shareholders approved a change of the company’s name to Baby Equip Ltd. This name is more descriptive of the business of the group which has expanded considerably during the past few years. The change does not indicate a change in the ownership or management of the group. The board of directors is confident that the new name will lead to a considerable improvement in the company's
business image.
17.2 An intrinsic defect was discovered in one of the company's products on 30 September 20.7. As a consequence thereof, sold units will have to be recalled and
recovered in order to correct it. Inventory on hand will also have to be corrected.
Additional information
1. Assume a tax rate of 28%.
2. Assume that all amounts involved are material and that the company is a going concern irrespective of the effect of the above-mentioned on the financial statements.
Required
Comment on the acceptability of the note in view of International Financial Reporting Standards (IFRS). Indicate how each of the above-mentioned matters shall be disclosed in the financial statements of the company in order to comply with the requirements of International Financial Reporting Standards (IFRS) if the following is assumed:
Rand
 Cost to rectify closing inventory 30 000
 Cost to recover defective units sold in 20.7 10 000
 Cost to repair defective units sold in 20.7 60 000
 Cost to recover and repair defective units manufactured in 20.8 150 000
It is not necessary to give the disclosure concerning the date the financial statements were authorised for issue and who gave that authorisation, as required by IAS 10.