Question

A customer made a claim for $50 000 for losses suffered by the late delivery of goods The main part ($40 000) of the claim was referred to goods due to be delivered before the year end. Explain how this would be dealt with under IAS 10.

Answer 1

the customer made a claim of $ 50,000.

out of this $ 50,000, $40,000 pertains to due to delivery before the year end, which makes it an adjusting event as per IAS 10 i.e. an event beforethe reporting period that is indicative of a condition that arouse before the end of the reporting period.

the entity should make provision for $40,000

Statement of Profir and loss DR $ 40,000

To Provision for loss due to late delivery CR $ 40,000

And the remaning $ 10,000 are non adjusting event, i.e. an event after the reporting period that is indicative of a condition that arouse after the end of the reporting period. This should not be adjusted in Books of accounts that is no journel entry needs to be passed. but it will be shown in notes to accounts as a foot note as a part of disclosure requirement as per IAS 10.