Reference no: EM132919653
The following informaton had been made available to you to assist in the preparation of the financial statements of ABC Ltd for the year ended 30 June 2020.
Point a. The company has been involved in a dispute with a government environment agency relating to the release of noxious gases from its manufacturing plant in early June 2020. An expert investigation was conducted to determine if the company was at fault. The draft financial report already discloses contingent liability in the notes detailing the investigation and estimating the potential damages at $1.25 millions. The investigator's report, released on 1 August 2020, found ABC Ltd to be responsible for the release and damages amounting to $1,500,000 were payable by the company.
Point b. On 25 August 2020, the company received notification that a customer owing $130,000 had gone into liquidation. The liquidator advised that unsecured creditors are likely to receive a distribution of only 20c in the dollar. The liquidation was caused by a flood in July 2020 which destroyed the customer's operating plant and warehouse. The damage was not covered by insurance.
ABC Ltd's draft profit for the year ended 30 June 2020 is $800,000.
On 30 Sep 2020, the director of ABC ltd signed off the declaration, the date on which financial statements are authorised for issue.
Required:
Problem a. Classify the above events as either adjusting or non adjusting events after the end of the reporting period. justify your classification, Hint: following can be used to help you arranging the answer of this question.
Date Event Condition at 30 June 2020 New information Classification