Banksia Plc is in the process of completing its financial reports for the period ended 30 June 2014 when it becomes public knowledge that company income tax rates are to be increased and that the increase is to apply retrospectively to the financial year just completed.What treatment is required by IAS 10 for this item?
A)No disclosure is required because the information is publicly available.
B)The potential effect on the accounts should be disclosed in the notes to the financial statements.
C)If material, the financial statements should be adjusted to reflect the impact of the event.
D)An adjustment to the statement of comprehensive income should be made, but only note disclosure for the statement of financial position since it is prepared as at the reporting date.

Question

Quizplus · Accepted Answer

According to IAS 10, if an event occurs after the reporting period but before the approval of financial statements and it provides evidence of conditions that existed at the end of the reporting period, the financial statements should be adjusted to reflect the impact of the event if material. As the increase in income tax rates is to apply retrospectively to the financial year just completed, it provides evidence of a condition that existed at the end of the reporting period. Therefore, if material, the financial statements should be adjusted to reflect the impact of the event. Note disclosure is not sufficient as an adjustment to the financial statements is required.

Banksia Plc Is in the Process of Completing Its Financial