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Revision question on IAS 10 NBAA May 2019

Mapato Ltd is one of your audit clients whose financial reporting year ends on 31st July. The financial statements are always due to be approved on 18th September each year. While reviewing the audit work for the financial year ended 31st July 2018 the following events have come to your attention: 1. On 2nd August 2018, Mapato sold inventory for a price which was less than its cost (the inventory was recorded in the financial statements to 31st July 2018 as closing inventory). 2. Mapato issued new shares on 3rd August 2018. 3. A fire in the warehouse destroyed all of Mapato’s inventory on 8th August 2018. 4. A major customer that owed Mapato TZS.150 million at 31st July 2018 was declared bankrupt on 10th August 2018. 5. Mapato purchased an asset for TZS.800 million on 21st August 2018. 6. On 27th August 2018, Mapato’s lawyer received a claim from an employee who fell on Mapato’s office premises on 1st March 2018. The Lawyer estimates the value of the claim, indicating legal fees, to be TZS.75 million.

REQUIRED:

Review each of the six events above and advise with reasons: (i) If it is an adjusting or non-adjusting event, and

(ii) The impact of the above events (if any) on Mapato’s financial statements.

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