Reference no: EM132409086
Question
It is February 2021 and Janix Corporation is preparing to issue financial statements for the year ended December 31, 2020. To prepare financial statements and related disclosures that are faithfully representative, Janix is reviewing the following events in 2020 and 2021:
1. In August 2020, Maddux Incorporated filed a lawsuit against Janix for alleged patent infringement, claiming $1.8 million in damages. In the opinion of Janix's management and legal counsel, it is not likely that damages will be awarded to Maddux.
2. In January 2021, there was a significant decline in the fair value of Janix's FV-NI investments, resulting in an unrealized holding loss of $720,000.
3. In January 2021, a customer filed a lawsuit against Janix for alleged breach of contract related to services provided in 2020. The customer is seeking damages of $950,000. Janix's legal counsel believes that Janix will likely lose the lawsuit and have to pay between $850,000 and $950,000.
4. In August 2020, Janix signed a contract to purchase 200,000 inventory units in August 2021 for a price of $12 per unit. According to the supplier's price list at December 31, 2020, the price per inventory unit had decreased to $10 per unit.
5. At December 31, 2020, Janix had a $1.1-million demand loan outstanding. The terms of the demand loan restrict Janix's payment of dividends to $2 per common share.
6. On January 31, 2021, Janix issued 100,000 new common shares, raising $2 million in new capital.
7. On January 28, 2021, management settled a dispute with the union of its factory workers. A strike had started on November 14, 2020. A portion of the settlement involved a lump sum payment to each worker in lieu of a retroactive adjustment in pay rate dating back to the beginning of the strike.
Janix prepares financial statements in accordance with IFRS.
Instructions
For each item above, indicate whether the event relates to a provision, contingency, commitment, or subsequent event, and explain the appropriate accounting treatment. If no adjustment or disclosure is required, explain why.
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