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[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section admin_label=”Section” fullwidth=”off” specialty=”off”][et_pb_row admin_label=”Row”][et_pb_column type=”1_2″][et_pb_text admin_label=”Text” background_layout=”light” text_orientation=”center” text_font_size=”14″ use_border_color=”off” border_color=”#ffffff” border_style=”solid”] [button link=”http://www.frs102.com/members/premium-toolkit/” type=”big” color=”red”] Return to Main Index[/button] [/et_pb_text][/et_pb_column][et_pb_column type=”1_2″][et_pb_text admin_label=”Text” background_layout=”light” text_orientation=”center” text_font_size=”14″ use_border_color=”off” border_color=”#ffffff” border_style=”solid”] [button link=”https://uk.frs102.com/members/premium-toolkit/section-1/” type=”big” color=”red”] Return to Section 1 Home[/button] [/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section admin_label=”Section” fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” padding_mobile=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″][et_pb_row admin_label=”Row”][et_pb_column type=”4_4″][et_pb_text admin_label=”Main Body Text” background_layout=”light” text_orientation=”justified” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]Example 1: Application
A piece of land sold by a Company subject to planning where planning had not been obtained pre year end, should not be recognised as a sale in that year. The fact that planning is obtained post year end is not an adjusting post balance sheet event.
If on the other hand this was sold without planning and if planning is obtained the price will increase, then the sale would be recognised at its fair value at the balance sheet date depending on probabilities. If just after year end, planning is or is not obtained, then the year end sale is not adjusted. It is instead treated as a non-adjusting post balance sheet event and therefore disclosed.
Example 2: Recoverability of trade debtor balances
Company A was owed CU100,000 from customer B at year end. Following year end the customer got into financial difficulty and is trying to enter an arrangement with creditors. Based on discussions with the Customer here, it is likely these events would force Company A to provide against the receivable balance of CU100,000.
Example 3: Indicators of impairment of PPE/land etc.
Company A owns a property stated in the year end accounts at CU500,000. Prior to issuing the financial statements a valuation was performed on this property for the purposes of valuing the company. This placed a value of CU300,000. Under Section 27, this is an indicator of impairment and a provision should be made to write the asset down to CU300,000 assuming the fair value less cost to sell is higher than value in use.
Example 4: Profit on sale of plant after year end following decision to close
Company A decided to close one of its factories and has announced the closure and redundancies to all relevant parties pre-year end. In accordance with Section 21 a provision for restructuring costs has been included in the year end accounts. Subsequent to the year end the company sold its factory for a profit. Can the entity use the profit element to reduce the provision?
The answer is no as Section 21 specifically disallows profits on disposal of fixed assets to be netted against a provision. Therefore it is a non-adjusting event. Fixed assets would be dealt with by Section 27-Impairment of assets.
Example 5: Closing office and relocating
Company A has operations in a number of counties. Prior to year end it announced that one of the locations would close and that all staff will be relocated to another location. All parties have been advised pre year end and the client has included a provision for same. Is this an adjusting event/can a provision be included?
The answer is no, as Section 21 specifically dis-allows relocation provisions.
Example 6: Other than going concern disclosure
Basis of preparation
As explained in the directors’ report on page X, the company intends to cease operations by XXXX and to transfer all its operations to XXXXX.
The financial statements have not been prepared on a going concern basis. Where appropriate, the carrying values of assets have been restated to their recoverable amounts, and liabilities have been restated to their estimated settlement amounts and classified as current. Provision has been made for all closure costs arising from the decision to cease trading.
Preparation of financial statements on a break up basis involves the company making estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances, and are continually re-evaluated.
Example 7: Extract for the approval of the financial statements
The financial statements were approved by the Board of Directors on (Insert date) and authorised for issue on (insert date). They were signed on its behalf by
Mr A Director
Director
DATE: __________________
Example 8: Extracts for some non-adjusting post balance sheet events.
Extract from notes to the financial statements
Events after the balance sheet date
On 1 February XXX the company acquired intangible assets for a consideration of CUXX.
OR
Subsequent to the year end the directors decided to cease trading. All assets of the company have been disposed of to another group company for CUXXXX.
OR
On 31 December XXX, the shareholders of XXXX Limited (formerly XXXX Limited) (a company controlled by the directors of this company) decided to separate the company’s investment activities from its trading activities. As a result the company transferred the trade assets and liabilities to XXXXX by way of a distribution in specie in return for shares in this company being issued to the company’s shareholders. As part of the reorganisation the name of the company was also changed to XXXX Limited. The following assets and liabilities were transferred to XXXX Limited as part of the re-organisation:
|
|
CU |
|
|
|
|
Tangible fixed assets |
XXXX |
|
Stock |
XXXX |
|
Debtors |
XXXX |
|
Cash |
XXXX |
|
Payables |
(XXXX) |
|
|
XXXXX |
OR
The company succeeded in its claim against XXXXX which arose as a result of the loss of earnings due to restrictions imposed on the company. A Court Appeal hearing after year end made an award of CUXXXXX plus costs. This has not been recognised in the financial statements at 31 December 2015 on the basis that at the balance sheet date the outcome of the case was not certain.
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