Reference no: EM132756958

Problem 1: The statement of financial position of ABC Co., as of January 1, 20x4 included an allowance for bad debts computed using the "aging of accounts receivable" method. The "over 120 days" category in the aging schedule included a P200,000 receivable which was actually written off on January 5, 20x4, (the 20x3 financial statements were authorized for issue on March 1, 20x4 ). ABC Co., could not have foreseen this event on December 31, 20x3. Does ABC Co., need to revise its previous estimate of bad debts as of January 1, 20x4 (date of transition ) on December 31, 20x5 (end of first PFRS reporting period }?

a) No. The receipt of information on January 5, 20x4 is accounted for prospectively as a non-adjusting event
after the reporting period.

b) Yes. The receipt of information on January 5, 20x4 is accounted for retrospectively as an adjusting event
after the reporting period.

c) No. The event should be ignored because it is within the scope of the previous GAAP and not the PFRS.

d) Yes. Although PFRS 1 does not require the adjustment, other PFRS do.