Reference no: EM132555740
Tangent Ltd is an Australian company that operates businesses in the retail sector. Their businesses include retail stores that operate as supermarkets, convenience stores, clothing and general merchandise stores. As a result of a general downturn in retail business over the past few years, and specific restrictions caused by a global pandemic during early 20X0, Tangent Ltd has suffered significant and sustained losses in all of their general merchandise stores. In May 20X0, after a period of consideration, the Board of Directors decided to close down approximately half of their general merchandise stores and convert many of the remaining stores in that sector to supermarkets. It was estimated that over 1,000 jobs would be lost as a result of the store closures.
In June 20X0 the company sent letters to relevant employees and announced to the public through various media outlets the details of the stores that would be closed or converted to supermarkets. The employee letters included details of whether the employee would be made redundant, and if so the details of any compensation they would receive, or whether they would be offered an opportunity to retrain so that they could continue working for the organisation.
The employee redundancy payments were estimated to be $50million and the costs of retraining staff were estimated to be $30million. Costs other than those related to either redundancy or retraining were estimated to be $100million for store closures and $80million for refurbishment and conversion to supermarkets.
It was estimated that the closures would commence in September 20X0 and the process would be completed by May 20X1.
Required:
Question 1: Explain how the events described above would be accounted for in the financial statements of Tangent Ltd for the year ended 30 June 20X0. Your answer should include any journal entries and disclosures that may be required. Your answer must clearly state your position, provide the evidence that you have used to determine that position and support your answer with paragraph references from one or more relevant Australian Accounting Standards.