Fruitcorp Ltd has been negotiating a merger with a company that is currently its major supplier.Subsequent to reporting date the merger agreement is finalised.The merger materially affects the size and structure of the new entity and should bring substantial economic benefits to all shareholders.How should this event be reported according to AASB 110?
A) The size and significance of this event is such that it should be fully reflected in the financial accounts. New group accounts should be prepared to reflect the actual economic entity that exists at the time of completion of the financial reports.
B) No disclosure is appropriate.
C) A description of the event, the fact that it occurred after reporting date and its financial effect on the company should be disclosed by way of a note to the accounts.
D) Disclosure of the event in the Directors' Declaration is required by AASB 110.
E) None of the given answers.

Question

Quizplus · Accepted Answer

According to AASB 110, events after the reporting period that provide evidence of conditions that arose after the reporting period should be disclosed in the notes to the financial statements if they are material. The merger is a non-adjusting event that occurred after the reporting date, and its financial effects should be disclosed in the notes.

Fruitcorp Ltd Has Been Negotiating a Merger with a Company