Events After Reporting Period - Test Bank | 9e

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Chapter 21 Testbank

1. There is typically a two- to three-month delay between the end of the reporting period and the date when an organisation's financial statements are authorised for issue to stakeholders, such as shareholders. With this delay, the information therefore starts to suffer from a lack of timeliness; it thus has reduced 'relevance'.

True   False

2. A statement of financial position in Australia is typically headed, 'Statement of financial position as at 30 June 2019'.

True   False

3. There are generally two basic types of subsequent events (events after the reporting period) requiring consideration. First, there are those that relate to events that occurred before the end of the reporting period; and second, there are those that relate to events that occur after the end of the reporting period.

True   False

4. Apart from the general requirements of AASB 110, it should be acknowledged that within Australia the Corporations Act also contains requirements related to after-reporting-period events.

True   False

5. Something is deemed to be 'material' if its omission, non-disclosure or misstatement is unlikely to affect economic decisions or other evaluations made by users entitled to rely on the financial statements.

True   False

6. An adjusting event is one that:

A. occurs before the auditor signed the audit report.

B. provides additional evidence of or information about conditions that existed at the reporting date.

C. occurs after reporting date and relates to impacts that will occur before the time of completion.

D. provides additional evidence of or information about conditions that existed at the time of completion.

7. In the case of a non-adjusting event, AASB 110 requires it to be:

A. reflected in the financial statements, if it is an unfavourable material event; disclosed by way of a note, if it is a favourable event.

B. disclosed by way of note if it is material.

C. reflected in the financial statements if it is material and relates to an item that would normally be included in the financial statements.

D. disclosed as a contingent liability, if it is an unfavourable material event.

8. The disclosures that AASB 110 requires for a material non-adjusting event include:

A. the financial effect of the event or, where it is not possible to estimate the effect reliably, a statement to that effect.

B. a description of why the event only came to be known of after the reporting date.

C. details of the corporate governance procedures in place to ensure that further information regarding the event is gathered in a timely fashion.

D. adjustments to the financial statements to the extent that it can be quantified.

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

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 to no longer 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. Dividends announced before the end of the financial period to which the financial statements relate.

10. Hawk Ltd has borrowed substantially in foreign currency loans. An unexpected major downturn in the Australian economy after the 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?

A. Additional extensive disclosure of the realisation value of assets and the amounts at which liabilities are expected to be settled

B. Recognition of the assets 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. Recasting of the financial statements using a fair value basis

11. 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?

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 required.

C. A description of the event, the fact that it occurred after the 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.

12. Which of the following statements represents the disclosure requirements for material non-adjusting events given in AASB 110?

A. The nature of each event must be disclosed.

B. An estimate of its financial effect must be incorporated into the financial statements.

C. The information is to be disclosed only if its financial effect can be estimated.

D. None of the given answers are correct.

13. The __________ is also referred to as the reporting date.

A. balance sheet date

B. date of Directors' Declaration

C. report issue date

D. authorised date

14. In Australia, _____________ is typically the end of the reporting period.

A. 30 June

B. 30 January

C. 30 December

D. 30 March

15. The date on which the financial statements are authorised for issue will, according to AASB 110, vary depending upon the ______________, statutory requirements and procedures followed in preparing and finalising the financial statements.

A. management structure

B. management style

C. industry structure

D. management norms

16. For Australian corporate entities, which of the following is usually deemed to be the date on which the financial statements are authorised for issue?

A. The date of preparation of financial statements

B. The balance sheet date

C. The date the Directors' Declaration is signed

D. The date of the auditors' report

17. The statement of financial position in Australia is typically headed, 'Statement of financial position as at 30 June 20XX'. If something material happens after 30 June, it would be _________ to alter the 30 June statement of financial position.

A. appropriate

B. inappropriate

C. easy

D. prompt

18. With regard to __________, AASB 110 requires the financial statements to reflect the financial effect of an event occurring after the end of the reporting period that provides additional evidence of conditions that existed at the end of the reporting period, or reveals for the first time a condition that existed at the end of the reporting period.

A. adjusting events

B. non-adjusting events

C. material events

D. subsequent events

19. If dividends are declared after the reporting period but before the financial statements are authorised for issue, the dividends are __________as a liability at the end of the reporting period because no obligation exists at that time. Such dividends are disclosed in the notes in accordance with AASB 101 Presentation of Financial Statements (AASB 110).

A. not recognised

B. recognised

C. authorised

D. not authorised

20. All the items listed in AASB 110, paragraph 22 would be disclosed in the notes to the financial statements to the extent that the impacts on future financial statements are deemed to potentially be ___________.

A. immaterial

B. feasible

C. material

D. non-feasible

21. An entity shall disclose the date on which the financial statements were authorised for issue and who gave that authorisation. If the entity's owners or others have the power to amend the financial statements after issue, the entity shall ____________ (AASB 110).

A. not disclose that fact

B. disclose that fact

C. disregard that

D. keep that for internal reference

22. Apart from the general requirements of AASB 110, it should be acknowledged that within Australia the _____________also contains requirements related to after-reporting-period events.

A. Labour Act

B. Australian Securities Commission Act

C. Corporations Act

D. Criminal Act

23. For entities other than companies, the date the financial statements are authorised for issue is the date of final approval of the statements by the management or _______of the entity, whichever is applicable.

A. lower level employees

B. governing body

C. related party

D. auditor

24. There is a general requirement that the statement of financial position and the statement of profit or loss and other comprehensive income must be prepared on the basis of conditions existing _______.

A. at the end of the reporting period

B. at the beginning of the reporting period

C. at any time during the reporting period

D. at the middle of the reporting period

25. An entity shall not prepare its financial statements on a going concern basis if management determines after the reporting period either that it intends to ____________ or to cease trading, or that it has no realistic alternative but to do so (AASB 110).

A. liquidate the entity

B. acquire a new entity

C. make it profitable

D. merge its subsidiaries

26. What is an 'adjusting event' in accordance with AASB 110? Provide examples.

______________________________________________________________________________

27. What is a 'non-adjusting event' in accordance with AASB 110? Provide examples.

______________________________________________________________________________

28. Discuss the disclosure requirements for non-adjusting events as prescribed in AASB 110.

______________________________________________________________________________

29. Discuss the disclosure requirements required for events occurring after the end of the reporting period.

______________________________________________________________________________

30. What is the balance sheet date?

______________________________________________________________________________

31. What is an 'event after the reporting period'?

______________________________________________________________________________

32. Why is there a reduced relevance in terms of the disclosure requirements pertaining to the events occurring after the end of the reporting period?

______________________________________________________________________________

33. What is the usual delay between the end of the reporting period and the date when an organisation's financial statements are authorised for issue to stakeholders, such as shareholders?

______________________________________________________________________________

34. When is the reporting date for most of the companies in Australia?

______________________________________________________________________________

35. Why do we need to know about the disclosure requirements pertaining to events occurring after the end of the reporting period?

______________________________________________________________________________

36. What are the types of events after the reporting period?

______________________________________________________________________________

37. List any two examples of subsequent events that might make note disclosure necessary without adjusting the financial statements as per AASB 110.

______________________________________________________________________________

38. If the nature of an event is deemed to be material, is it imperative to disclose it in the notes of financial statements?

______________________________________________________________________________

39. When is something deemed to be material and therefore requires a note to the financial statement?

______________________________________________________________________________

Chapter 21 Testbank