You are a senior accountant in a tier $2$ accounting firm based in Australia. One of the firm$$s clients, Avocado Ltd$,$ has prepared a draft set of financial statements for the year ended $31$ December $2035.$ Your manager is in the process of reviewing and finalising these financial statements and has become aware of some events that have occurred after the end of the reporting period. Your manager has asked you to prepare an internal memorandum $($memo$)$ to provide them with accounting advice regarding the following three events:

$$ On $18$ February $2036$ Avocado Ltd settled a workplace injury claim with a former employee. The employee was injured at work on $11$ November $2035.$ Damages awarded to the employee amounted to $$87,000.$

$$ On $24$ February $2036$ the directors of Avocado Ltd declared a final dividend of $$9\mathrm{.}50$ per share. The draft financial statements include a liability for this dividend.

$$ On $27$ February $2036$ Avocado Ltd issued $500,000$ fully paid shares to fund the acquisition of the net assets of Feta Ltd$.$ Additional information:

$-$ The end of financial year of Avocado Ltd is $31$ December $2035.$

$-$ The annual general meeting of the shareholders is scheduled to be held on $28$ February $2035.$

$-$ Management plans to complete the draft financial statements on $17$ February $2036$ to submit to the board of

directors the following day.

$-$ The board of directors is scheduled to review the financial statements at its meeting on $25$ February $2036$ and to

authorise them for issue to the shareholders.

$-$ All events are considered material due to the nature and$/$or amount.

 

 

Required:

Prepare a memorandum for your manager to outline the accounting treatment and disclosure requirements in relation to each of the three events noted above. For each event, determine if it is an $$event after the reporting period$$ and if so$,$ classify it as an $$adjusting event$$ or a $$non$-$adjusting event.$$ Provide support for your accounting advice with reference to the relevant paragraphs of the accounting standard. Outline for your manager if you are aware of any changes to the accounting treatment in relation to such issues noting that your manager completed their studies prior to $2005.$

Answer rating: 100% (QA)

Memorandum Date Enter Date To Managers Name From Your Name Subject Accounting Treatment and Disclosure Requirements for PostReporting Period Events In... View the full answer