Under IFRS, share dividends declared after the statement of financial position date but before the end of the subsequent events period are:
a) accounted for similar to errors as a prior period adjustment.
b) adjusted subsequent events, because they are paid from prior year earnings.
c) not adjusted in the current year’s financial statements.
d) recognized on a prospective basis from the date of declaration
Financial statements are reports generated by a company's management to demonstrate the company's financial performance and position at a certain moment in time. A balance sheet, income statements, statement of owner's equity, and statement of cash flows are usually included in a general-purpose collection of financial statements.
International Financial Reporting Standards (IFRS) are financial reporting standards developed by the International Accounting Standards Board (IASB) and the IFRS Foundation. They were designed to give a unique worldwide script for business activities in order to provide financial reporting uniformity across organizations.
Any share dividends issued after the date of the statement of financial position or balance sheet but before the end of the subsequent event period are not adjusted in the current year's financial statements, according to IFRS.
Therefore option (c) is not adjusted in the current year’s financial statements is the correct option.
a) Redrawing past period financial statements can be used to make prior period modifications. This is accomplished by changing the carrying values of any relevant assets or liabilities as of the first accounting period shown, with an offset to the retained earnings balance as of the same accounting period's beginning.
b) IAS 10 requires evaluation of events later through the date the financial statement is approved for issuance, but later through the date the financial statement is issued or ready to be issued for this statement events need to be evaluated.
c) Under IFRS, share dividends declared after the statement of financial position date but before the end of the subsequent events period are not adjusted in the current year’s financial statements and they also should not be recognized on a prospective basis from the date of declaration
Edna Millay Inc. is a manufacturer of electronic components and accessories with total assets of $20,000,000. Selected financial ratios for Millay and the industry averages for firms of similar size are presented below.
Net sales to stockholders’ equity
Return on common stockholders’ equity
Total liabilities to stockholders’ equity
Millay is being reviewed by several entities whose interests vary, and the company’s financial ratios are a part of the data being considered. Each of the parties listed below must recommend an action based on its evaluation of Millay’s financial position.
Archibald MacLeish Bank. The bank is processing Millay’s application for a new 5-year term note. Archibald MacLeish has been Millay’s banker for several years but must reevaluate the company’s financial position for each major transaction.
Robert Penn Warren. A brokerage firm specializing in the stock of electronics firms that are sold over-the-counter, Robert Penn Warren must decide if it will include Millay in a new fund being established for sale to Robert Penn Warren’s clients.
Working Capital Management Committee. This is a committee of Millay’s management personnel chaired by the chief operating officer. The committee is charged with the responsibility of periodically reviewing the company’s working capital position, comparing actual data against budgets, and recommending changes in strategy as needed.
a) Describe the analytical use of each of the six ratios presented above.
Answer each of the questions in the following unrelated situations.
b) A company had an average inventory last year of $200,000 and its inventory turnover was 5. If sales volume and unit cost remain the same this year as last and inventory turnover is 8 this year, what will average inventory have to be during the current year?
(Horizontal and Vertical Analysis) Presented below is the comparative balance sheet for Gilmour Company.
COMPARATIVE BALANCE SHEET
AS OF DECEMBER 31, 2018 AND 2017
Accounts receivable (net)
Plant & equipment
Liabilities and Stockholders’ Equity
(Round to two decimal places.)
(Post-Balance-Sheet Events) For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose.
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