Assignment task:
You are a senior accountant in a tier 2 accounting firm based in Australia. One of the firm's clients, Avocado Ltd, has prepared a draft set of financial statements for the year ended 31 December 2035. Your manager is in the process of reviewing and finalising these financial statements and has become aware of some events that have occurred after the end of the reporting period. Your manager has asked you to prepare an internal memorandum (memo) to provide them with accounting advice regarding the following three events:
- On 18 February 2036 Avocado Ltd settled a workplace injury claim with a former employee. The employee was injured at work on 11 November 2035. Damages awarded to the employee amounted to $87,000.
- On 24 February 2036 the directors of Avocado Ltd declared a final dividend of $9.50 per share. The draft financial statements include a liability for this dividend.
- On 27 February 2036 Avocado Ltd issued 500,000 fully paid shares to fund the acquisition of the net assets of Feta Ltd. Additional information:
- The end of financial year of Avocado Ltd is 31 December 2035.
- The annual general meeting of the shareholders is scheduled to be held on 28 February 2035.
- Management plans to complete the draft financial statements on 17 February 2036 to submit to the board of directors the following day.
- The board of directors is scheduled to review the financial statements at its meeting on 25 February 2036 and to authorize them for issue to the shareholders.
- All events are considered material due to the nature and/or amount.
Required:
Memorandum for your manager to outline the accounting treatment and disclosure requirements in relation to each of the three events noted above. For each event, determine if it is an 'event after the reporting period' and if so, classify it as an 'adjusting event' or a 'non-adjusting event.' Provide support for your accounting advice with reference to the relevant paragraphs of the accounting standard. Outline for your manager if you are aware of any changes to the accounting treatment in relation to such issues noting that your manager completed their studies prior to 2005.