Karingai Co Plc has been experiencing cash flow difficulties and sought a long-term loan from a merchant bank to enable it to restructure its financing from short-term to long-term debt.The loan has been approved by the bank after reporting date and the funds are expected to be received before the time of completion of the accounts.How should this event be reported according to IAS 10?
A)If the loan is material and the effect on the future financial performance of the entity is significant, IAS 10 requires the directors to disclose the event in the Director's Report and incorporate it into the financial statements.
B)The directors are required to disclose the event in the Statement of Directors' Responsibilities.
C)No note disclosure is required in this case.
D)The even should be disclosed in a note, the fact that it occurred after reporting date and its financial effect on the company should be provided.

Question

Quizplus · Accepted Answer

According to IAS 10, if an event occurs after the reporting date but before the financial statements are authorized for issue, and it provides additional information about the entity's position as at the end of the reporting period, the event should be disclosed in a note to the financial statements. In this case, the loan is material and has a significant effect on the company's financing structure, therefore it should be disclosed in a note, including the fact that it occurred after the reporting date and its financial effect on the company.

Karingai Co Plc Has Been Experiencing Cash Flow Difficulties and Sought