Question

You are reviewing the 2019 financial statements of Oil Ltd. As part of your final review you notice that the Statement of Financial Position includes an asset ‘Debenture money receivable $800 000’ and a liability ‘Debentures $800 000’. Note 14 to the accounts reveals that the issue of the debentures was approved by the board of directors on 28 June 2019, but the debenture issue did not take place until 17 July 2019.

Required

Review the information given above and determine whether the accounting treatment of the debenture issue is in accordance with the requirements of AASB 110 Events After Reporting Period.

Answer 1

As per AASB 110 there are two types of events:

Adjusting Events :Events that provide conditions existed at the end of reporting period.

Non Adjusting Events: Events that are indicative of conditions that arose after the end of reporting period.

Case:

Issue of debuntures approved by Board of directors on 28 June 2019 i.e, before the end of reporting period but the issue did not take place until 17th july 2019.

Therefore from the above definitions since the condition existed at the end of reporting period, this is an adjusting event and accounting treatment is in accordance with the AASB 110 Events after reporting period.