As per AASB 110, events occurring after balance sheet date are events which take place after the balance sheet date but before singing of the final accounts. These events can be classified into two major categories, adjusting events and non-adjusting events(CAANZ, 2017). Adjusting events are those events for which conditions existed on the balance sheet date, whereas non-adjusting events are those events for which there exist no conditions on the balance sheet date. As per the accounting standard, an entity is required to make adjustments or entries for the adjusting events in the balance sheet. For the non-adjusting events it would be enough for the company to report them in notes, if they are significant, else they are to be adjusted in the next balance sheet of the company(Aasb.gov.au, 2018). Also, it is important to understand the concept of materiality for this classification, any adjusting event if material will be reported in the final accounts. Materiality cannot be stated as a percentage or in any quantitative form. Any information which might affect the decision of the investor will be considered material. Considering this data we have classified few events of the Astro ltd as material or immaterial, if material then if they are adjusting or non-adjusting: 1.In the given scenario one of the customers of the company has returned goods worth $180000, due to the reason that the wrong goods were sent. The sale took place on 25thof June, and goods were returned on 3rd of July. This affects the profit of the company by $16000. The sum of $16000 is material to the company. Since the sale took place before the balance sheet date this event is to be classified as adjusting event and is to reported in the balance sheet. 2.In this case we see that an important machinery of the company was destroyed which harmed the operations of the company and resulted in loss of profits. The incident took place on 7thof August which is after the balance sheet date. This can affect the going concern assumption of the company. If this assumption is harmed, then this event is material and also adjusting event, requiring adjustment in the books of accounts. 3.In the given case we see that the asset of the company has been upward revalued at $900000 when it should have been revalued at $980000. This shows that the asset has been undervalued by $80000. The amount of $80000 is material and this mistake may affect the decision of the investor. Therefore this even is material and adjusting, both. The balance sheet should be adjusted.
4.In the given case Paul has authorised some cheques for which goods were not received. The amounts involved in the case are not huge and hence not material. But this may lead to detection of fraud for the company in future. This is not material, but the company should report this event in the annual report in the notes to accounts.
References Aasb.gov.au. (2018).Framework for the Preparation and Presentation of Financial Statements. [online] Available at: http://www.aasb.gov.au/admin/file/content105/c9/Framework_07-04_COMPjun14_07- 14.pdf [Accessed 27 Apr. 2018]. CAANZ, C. (2017).FINANCIAL REPORTING HANDBOOK 2017 AUSTRALIA. SYDNEY: WILEY AUSTRALIA.