Question 1

After the auditor has signed the audit report the next step in the process is to:

Accepted Answer

A)  Print and distribute the reports. 
B)  Have the directors sign the Directors' Declaration. 
C)  Prepare the financial statements. 
D)  Prepare the notes to the accounts. 
E)  None of the given answers. 
A)  Print and distribute the reports. 
B)  Have the directors sign the Directors' Declaration. 
C)  Prepare the financial statements. 
D)  Prepare the notes to the accounts. 
E)  None of the given answers. A

Question 2

Which of the following material after balance sheet date events is a non-adjusting event?

Accepted Answer

A)  Major disposal of assets before the reporting date. 
B)  Expropriation of assets by government before the reporting date. 
C)  Issue of preference shares shortly after the reporting date. 
D)  Settlement before authorisation date of the financial report of a lawsuit filed by a customer three years ago. 
E)  None of the given answers. 
A)  Major disposal of assets before the reporting date. 
B)  Expropriation of assets by government before the reporting date. 
C)  Issue of preference shares shortly after the reporting date. 
D)  Settlement before authorisation date of the financial report of a lawsuit filed by a customer three years ago. 
E)  None of the given answers. C

Question 3

A decline in market value of investments between the reporting period and the date the financial report is authorised for issue is typically an adjusting event.

Accepted Answer

A) True 
 B)False  False

Question 4

Hawk Ltd has borrowed substantially in foreign currency loans.An unexpected major downturn in the Australian economy after reporting date has substantially weakened the Australian dollar.It appears that Hawk Ltd will not be able to meet the foreign currency debt as it falls due.According to AASB 110,how should this event be reported in the financial statements?

Accepted Answer

A)  Additional extensive disclosure of the realisation value of assets and the amounts at which liabilities are expected to be settled. 
B)  The assets should be recognised in the financial statements at fair value and the liabilities reported at their settlement amounts. 
C)  Additional extensive disclosures about the timing and maturity date of debts and the cash flow shortfalls expected. 
D)  A recasting of the financial statements using fair value basis. 
E)  None of the given answers. 
A)  Additional extensive disclosure of the realisation value of assets and the amounts at which liabilities are expected to be settled. 
B)  The assets should be recognised in the financial statements at fair value and the liabilities reported at their settlement amounts. 
C)  Additional extensive disclosures about the timing and maturity date of debts and the cash flow shortfalls expected. 
D)  A recasting of the financial statements using fair value basis. 
E)  None of the given answers.

Question 5

Banksia Ltd is in the process of completing its financial reports for the period ended 30 June 2009 when it becomes public knowledge that company income tax rates are to be increased and that the increase is to apply retrospectively to the financial year just completed.AASB 110 requires what treatment for this item?

Accepted Answer

A)  No disclosure is required because the information is publicly available. 
B)  The potential effect on the accounts should be disclosed in the notes to the financial statements. 
C)  If material, the financial statements should be adjusted to reflect the impact of the event. 
D)  An adjustment to the income statement should be made, but only note disclosure for the balance sheet since it is prepared as at the reporting date. 
E)  None of the given answers. 
A)  No disclosure is required because the information is publicly available. 
B)  The potential effect on the accounts should be disclosed in the notes to the financial statements. 
C)  If material, the financial statements should be adjusted to reflect the impact of the event. 
D)  An adjustment to the income statement should be made, but only note disclosure for the balance sheet since it is prepared as at the reporting date. 
E)  None of the given answers.

Question 6

Bonus payments that are part of an existing agreement with employees determined after the reporting date is an example of an adjusting event.

Accepted Answer

A) True 
 B)False

Question 7

Harrier Ltd has borrowed substantially using foreign currency loans.An unexpected major downturn in the Australian economy after reporting date has substantially weakened the Australian dollar,increasing the size of the debt materially.According to AASB 110,how should this event be reported in the financial statements?

Accepted Answer

A)  The foreign currency debt should be restated at the new exchange rates and the loss recognised. 
B)  No reporting is required. 
C)  Harrier Ltd's bank and/or debenture trustees should be notified of the potential that the company may break its debt covenant. 
D)  Note disclosure of the event should be made. 
E)  None of the given answers. 
A)  The foreign currency debt should be restated at the new exchange rates and the loss recognised. 
B)  No reporting is required. 
C)  Harrier Ltd's bank and/or debenture trustees should be notified of the potential that the company may break its debt covenant. 
D)  Note disclosure of the event should be made. 
E)  None of the given answers.

Question 8

Disclosures required by AASB 110 relating to subsequent events that impact on the going-concern status of the entity include:

Accepted Answer

A)  The period over which the entity is expected to be able to continue trading. 
B)  Assets for which the going-concern basis is not appropriate, the carrying amounts and the amounts for which the assets are expected to be realised. 
C)  The directors' proposal for action to address the difficulties that have emerged since reporting date. 
D)  The period over which the entity is expected to be able to continue trading and assets for which the going-concern basis is not appropriate, the carrying amounts and the amounts for which the assets are expected to be realised. 
E)  None of the given answers. 
A)  The period over which the entity is expected to be able to continue trading. 
B)  Assets for which the going-concern basis is not appropriate, the carrying amounts and the amounts for which the assets are expected to be realised. 
C)  The directors' proposal for action to address the difficulties that have emerged since reporting date. 
D)  The period over which the entity is expected to be able to continue trading and assets for which the going-concern basis is not appropriate, the carrying amounts and the amounts for which the assets are expected to be realised. 
E)  None of the given answers.

Question 9

If an event or transaction that occurs after reporting date does not relate to conditions that existed at reporting date then:

Accepted Answer

A)  No action should be taken to report the event or transaction in the financial reports. 
B)  The balance sheet should not be adjusted but effects on the income statement should be reflected in that statement. 
C)  The event or transaction should be disclosed in the notes to the accounts as a post-reporting date event and the financial statements adjusted appropriately. 
D)  The event or transaction should be disclosed in the notes to the accounts if it is material. 
E)  None of the given answers. 
A)  No action should be taken to report the event or transaction in the financial reports. 
B)  The balance sheet should not be adjusted but effects on the income statement should be reflected in that statement. 
C)  The event or transaction should be disclosed in the notes to the accounts as a post-reporting date event and the financial statements adjusted appropriately. 
D)  The event or transaction should be disclosed in the notes to the accounts if it is material. 
E)  None of the given answers.

Question 10

Reporting date may occur 2 or 3 months after balance sheet date:

Accepted Answer

A) True 
 B)False

Question 11

Which of the following material after balance sheet date events is not considered a non-adjusting event

Accepted Answer

A)  A major acquisition of capital assets after the reporting date. 
B)  Destruction of inventory by vandals after the reporting date. 
C)  Changes in tax rates or tax laws enacted or announced after the reporting date. 
D)  Destruction of inventory on consignment by vandals before the reporting date. 
E)  A major business combination after the reporting date 
A)  A major acquisition of capital assets after the reporting date. 
B)  Destruction of inventory by vandals after the reporting date. 
C)  Changes in tax rates or tax laws enacted or announced after the reporting date. 
D)  Destruction of inventory on consignment by vandals before the reporting date. 
E)  A major business combination after the reporting date

Question 12

Fruitcorp Ltd has been negotiating a merger with a company that is currently its major supplier.Subsequent to reporting date the merger agreement is finalised.The merger materially affects the size and structure of the new entity and should bring substantial economic benefits to all shareholders.How should this event be reported according to AASB 110?

Accepted Answer

A)  The size and significance of this event is such that it should be fully reflected in the financial accounts. New group accounts should be prepared to reflect the actual economic entity that exists at the time of completion of the financial reports. 
B)  No disclosure is appropriate. 
C)  A description of the event, the fact that it occurred after reporting date and its financial effect on the company should be disclosed by way of a note to the accounts. 
D)  Disclosure of the event in the Directors' Declaration is required by AASB 110. 
E)  None of the given answers. 
A)  The size and significance of this event is such that it should be fully reflected in the financial accounts. New group accounts should be prepared to reflect the actual economic entity that exists at the time of completion of the financial reports. 
B)  No disclosure is appropriate. 
C)  A description of the event, the fact that it occurred after reporting date and its financial effect on the company should be disclosed by way of a note to the accounts. 
D)  Disclosure of the event in the Directors' Declaration is required by AASB 110. 
E)  None of the given answers.

Question 13

Reporting events after balance sheet date is concerned with:

Accepted Answer

A)  Information that becomes available between the date the reports are completed and the date the auditor signs the audit report. 
B)  Events that occur or information that becomes available after the directors sign the Directors' Declaration and before the reports are printed. 
C)  Events or transactions which occur or about which information becomes available between reporting date and time of completion. 
D)  Events or transactions which occur or about which information becomes available between balance sheet date and reporting date. 
E)  None of the given answers. 
A)  Information that becomes available between the date the reports are completed and the date the auditor signs the audit report. 
B)  Events that occur or information that becomes available after the directors sign the Directors' Declaration and before the reports are printed. 
C)  Events or transactions which occur or about which information becomes available between reporting date and time of completion. 
D)  Events or transactions which occur or about which information becomes available between balance sheet date and reporting date. 
E)  None of the given answers.

Question 14

If it becomes known after reporting date that a debtor is now not able to pay a material amount that is owed to the reporting entity,the appropriate action according to AASB 110 is to:

Accepted Answer

A)  Adjust the balance of accounts receivable and write off the bad debt and make a note disclosure that this event occurred after reporting date. 
B)  Adjust the balance of accounts receivable and write off the bad debt. 
C)  Disclose the event in the notes to the accounts. 
D)  Do nothing this period but write the debt off in the accounts for the next period. 
E)  None of the given answers. 
A)  Adjust the balance of accounts receivable and write off the bad debt and make a note disclosure that this event occurred after reporting date. 
B)  Adjust the balance of accounts receivable and write off the bad debt. 
C)  Disclose the event in the notes to the accounts. 
D)  Do nothing this period but write the debt off in the accounts for the next period. 
E)  None of the given answers.

Question 15

A non-adjusting event is one that:

Accepted Answer

A)  Provides evidence about new conditions that did not exist at reporting date. 
B)  Occurred before balance sheet date. 
C)  Provides additional evidence of or information about conditions that existed at the reporting date. 
D)  Occurred before the auditor signed the audit report. 
E)  None of the given answers. 
A)  Provides evidence about new conditions that did not exist at reporting date. 
B)  Occurred before balance sheet date. 
C)  Provides additional evidence of or information about conditions that existed at the reporting date. 
D)  Occurred before the auditor signed the audit report. 
E)  None of the given answers.

Question 16

The following are material events that occurred for Fraser Island Ltd between the reporting date and the date when the financial report is authorized for issue.   Which of the following options identify all the non-adjusting events for Fraser Island Ltd,in accordance with AASB 110 "Events after the reporting date"?

Accepted Answer

A)  I, II, III and VI; 
B)  I, II and V; 
C)  II, III and V; 
D)  III, IV and VI; 
E)  IV, V and VI. 
A)  I, II, III and VI; 
B)  I, II and V; 
C)  II, III and V; 
D)  III, IV and VI; 
E)  IV, V and VI.

Question 17

Yandalup Ltd has a series of outback cattle stations.Subsequent to reporting date it is discovered that flooding before balance sheet date has destroyed several farm buildings,equipment and some stock.The loss is material in size.How should this event be reported according to AASB 110?

Accepted Answer

A)  No disclosure is required. 
B)  The event's financial effect should be recognised in the financial statements for the period. 
C)  The event's effect on the entity should be included in note disclosure. 
D)  Disclosure of the event in the Directors' Declaration is required by AASB 110. 
E)  None of the given answers. 
A)  No disclosure is required. 
B)  The event's financial effect should be recognised in the financial statements for the period. 
C)  The event's effect on the entity should be included in note disclosure. 
D)  Disclosure of the event in the Directors' Declaration is required by AASB 110. 
E)  None of the given answers.

Question 18

The treatment for breach of going concern assumption as suggested AASB 110 was not acceptable in the old AASB 1002 for reasons that include:

Accepted Answer

A)  The event is so significant in its impact on the economic decision-making of general purpose financial statement users that it is vital that the financial statements be restated in the light of that information. 
B)  The ethical dilemma for accountants and accounting regulators is that by requiring more disclosure from an entity that is already in financial difficulty, the accountants may actually hasten the demise of a business. 
C)  It is not necessary to require the management of an entity to take action regarding its going-concern status since it is the responsibility of the auditors to establish that going-concern conditions exist. 
D)  It is not appropriate to adjust the assets and liabilities recognised in the financial statements because under The Corporations Law and SAC 2 the financial statements must provide operating results for the reporting period and the financial position as at the end of the reporting period. 
E)  None of the given answers. 
A)  The event is so significant in its impact on the economic decision-making of general purpose financial statement users that it is vital that the financial statements be restated in the light of that information. 
B)  The ethical dilemma for accountants and accounting regulators is that by requiring more disclosure from an entity that is already in financial difficulty, the accountants may actually hasten the demise of a business. 
C)  It is not necessary to require the management of an entity to take action regarding its going-concern status since it is the responsibility of the auditors to establish that going-concern conditions exist. 
D)  It is not appropriate to adjust the assets and liabilities recognised in the financial statements because under The Corporations Law and SAC 2 the financial statements must provide operating results for the reporting period and the financial position as at the end of the reporting period. 
E)  None of the given answers.

Question 19

In AASB 110 "Events after the Balance Sheet Date",a contingent liability is an example of an adjusting event:

Accepted Answer

A) True 
 B)False

Question 20

AASB 110 requires additional disclosures in which of the following situations?

Accepted Answer

A)  Related party transactions that affect the ability of the entity to trade profitably and that occur after reporting date. 
B)  Any event that occurs after the reporting date that would cause the entity no longer to be considered a going concern. 
C)  Any event likely to have a material effect that occurs after the directors have signed the Directors' Declaration. 
D)  Material changes to the dividends proposed for the following period that occurs after reporting date. 
E)  None of the given answers. 
A)  Related party transactions that affect the ability of the entity to trade profitably and that occur after reporting date. 
B)  Any event that occurs after the reporting date that would cause the entity no longer to be considered a going concern. 
C)  Any event likely to have a material effect that occurs after the directors have signed the Directors' Declaration. 
D)  Material changes to the dividends proposed for the following period that occurs after reporting date. 
E)  None of the given answers.

Exam 24: Events Occurring After Balance Sheet Date

After the auditor has signed the audit report the next step in the process is to:

Which of the following material after balance sheet date events is a non-adjusting event?

A decline in market value of investments between the reporting period and the date the financial report is authorised for issue is typically an adjusting event.

Bonus payments that are part of an existing agreement with employees determined after the reporting date is an example of an adjusting event.

Disclosures required by AASB 110 relating to subsequent events that impact on the going-concern status of the entity include:

If an event or transaction that occurs after reporting date does not relate to conditions that existed at reporting date then:

Reporting date may occur 2 or 3 months after balance sheet date:

Which of the following material after balance sheet date events is not considered a non-adjusting event

Reporting events after balance sheet date is concerned with:

If it becomes known after reporting date that a debtor is now not able to pay a material amount that is owed to the reporting entity,the appropriate action according to AASB 110 is to:

A non-adjusting event is one that:

Yandalup Ltd has a series of outback cattle stations.Subsequent to reporting date it is discovered that flooding before balance sheet date has destroyed several farm buildings,equipment and some stock.The loss is material in size.How should this event be reported according to AASB 110?

The treatment for breach of going concern assumption as suggested AASB 110 was not acceptable in the old AASB 1002 for reasons that include:

In AASB 110 "Events after the Balance Sheet Date",a contingent liability is an example of an adjusting event:

AASB 110 requires additional disclosures in which of the following situations?

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financ

Theories of Financial Accounting

An Overview of Accounting for Assets

Depreciation of Property, plant and Equipment

Revaluation and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Lease

Set-Off and Extinguishment of Debt

Accounting for Employee Benefits

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in E

Accounting for Share-Based Payments

Accounting for Income Taxes

Cash-Flow Statements

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Segment Reporting

Related-Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transact

Further Consolidation Issues II: Accounting for Minority Interests

Further Consolidation Issues III: Accounting for Indirect Ownershi

Further Consolidation Issues Iv: Accounting for Changes in the Deg

Accounting for Equity Investments

Accounting for Equity Investments

Accounting for Foreign Currency Transactions

Translation of the Accounts of Foreign Operations

Accounting for Corporate Social Responsibility

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