Financial Reporting
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Two events
My suggestion is that this event should be disclosed in the notes as contingent liability. This event does not satisfy the definition of liability in Framework. According to the Framework (para 49), a liability is defined as a present obligation arising from past events. Although disputing with customer is a past event, the existence of a present obligation is still unclear. It will be confirmed by the future court decision that is outside the control of our company. Moreover, the legal advice will not give raise a legal obligation since it is not a statutory requirement (Framework, para 60). Therefore, disputing with customer will only give rise a possible obligation (IAS 37, para 28). As a result, this obligation fulfils the definition of contingent liability, and then it should be disclosed in the notes. Furthermore, disclosure should include description of the nature of this contingent liability and its financial effect (IAS 37, para 86).

This is an adjusting event occurring after the reporting date. First, this event occurred between the year end and the date on which the financial statements are authorized for issue (IAS 10, para 3). Therefore, it is an event occurring after the reporting date. Second, the notification of customers liquidation provides the further evidence of conditions that existed at the year end. In other words, it reflects the fact that customer could not pay the debt at reporting date. Since the flood was happened in April, the customer would be insolvent as at 30 June. Therefore, customers liquidation confirms conditions at the end of reporting date. As a result, this is an adjusting event. The accounts receivable in the statement of financial of position should be adjusted by $85,000.

Investment
My suggestion to this investment is that it should be classified as financial asset in the category of fair value through profit and loss. According to the IAS 32, this investment gives rise to a legal contractual right between our company and investee (IAS 32, para 11). Our company has obligation to deliver cash to investee, and has right to receive cash (investment profit) from investee. Therefore, this investment is a financial asset within the scope of IAS 32.

Furthermore, this investment should be classified as fair value through profit and loss. Property trust holds this investment used entirely to meet the obligation of Hotelier. Our subsidiary could use fair value as the only relevant measure and manage the movement in fair value of this financial asset (IAS 39, para 9). Therefore, it satisfies the definition of financial asset at fair value through profit and loss.

For the measurement, this investment should be initially measured as fair value ($1.5 million) (IAS 39, para 43). Subsequently, it should be measured at fair value ($1.1 million) (IAS 39). Any change ($0.4 million) in fair value should be recognized in profit and loss (IAS 39).

Goodwill
In relation to goodwill, first, it should be disclosed on the statement of consolidation financial position at 30 June 2010. This goodwill rose from the business combination between our company and Hotelier. Since our company gained a control through this acquisition, consolidation financial statements should be prepared (IFRS 3). Therefore, goodwill of $350,000 should be disclosed on the face of statement of consolidation financial position.

Second, there is no tax effect on this goodwill. According to IAS 12, goodwill gives rise to an excluded temporary difference (IAS 12, para 15). In other word, deferred tax liability should not be recognized when it arising from goodwill. Therefore, there is no tax consequence relating to goodwill.

Fraud
This fraud should be treated as prior period error and be accounted retrospectively. Since the fraud occurred in the previous accounting period, accounting to IAS 8, it should be classified as prior period error (IAS 8). Moreover, this is a material error for our company. Therefore, retrospective correction of the error is necessary. There is no effect on the current accounting period. The error should be corrected by restating the opening balance of retained earnings. In other words, the $10 million should be written off from the opening retained earnings.

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Legal Advice And Present Obligation. (June 12, 2021). Retrieved from https://www.freeessays.education/legal-advice-and-present-obligation-essay/