“An
eye for an eye makes the whole world blind.”
Mahatma
Gandhi
Hello!
Welcome to another
edition of IFRS is easy
A Reddit thread
asked users to reveal a prank they’ve attempted that went horribly wrong. One
of the comments got me laughing out loud. The Reddit user (a male) wrote thus:
When I was about 15, I
wrote a really corny love letter to my middle-aged French teacher in terrible
French and signed my friend’s name. The whole thing was ridiculous –it was a
direct translation, so all the grammar was terrible and it had lines like, “I
love you more than the desert misses the rain, my sweet.” I snuck the letter
into her bag and then at the end of class she grabbed my friend and told him to
stay behind.
About 20 minutes of
maniacal chuckling later, my friend came up to me with a confused, somewhat
traumatized look on his face. It turns out that, without even mentioning the letter
to him, the teacher had declared that she also had strong feelings for him. She
explained how she couldn’t keep her eyes off him in class, had entertained
fantasies about him and had no idea that he felt the same way, but that their
relationship could go no further. My friend just stared at her in stunned
silence until she eventually ushered him to leave.
I guess almost everyone would have been a victim of pranks
like that before. Maybe not exactly as above. You’ll just keep staring at the
person, wondering whether you are dreaming or it’s actually real.
Yea, even the world of accounting can be that unreal
sometimes. I was reading some of the requirements of IAS 10 with respect to
non-adjusting events and this particular requirement got me twisting my brain
within my cranium:
IAS 10 requires that
the decline in fair value of investments between reporting period and date when the financial statements are
issued, should be classified as a non-adjusting event.
A non-adjusting
event? Why? Did the investment not already exist before the end of the year?
Why then will IAS 10 allow the sale of inventory at a price
substantially lower than its cost after the balance sheet date, to be
classified as an adjusting event, all because the inventory was in the books
before the year end? Why will IAS 10 require that the bankruptcy of a customer
after the balance sheet date, should be classified as an adjusting event?
Didn’t the three events seem to be of the same line? Didn’t they all seem to provide
evidence of conditions
that existed at the balance sheet date?
After much ado, I
had no choice but to agree to the IAS 10 requirement as it explains that the
decline in fair value does not normally relate to the condition of the
investments at the end of the reporting period, but reflects circumstances
(prevailing economic conditions that didn’t exist before the year-end) that
have arisen subsequently.
If you have a
dissenting opinion, I’ll be glad to hear it. The comment box is wide open.
As promised, we bring to
you 10 case study questions and solutions on IAS 10. You can download the
questions coupled with the solutions here.
To enjoy a full view of
the contents of our page, click the view web
version button at the bottom of our page.
Follow us on twitter
@ifrsiseasy. You’ll get to
interact with us better.
Don’t miss any of our
updates. Sign up for free by subscribing with your email for notifications.
Don’t forget to invite your
friends to our page.
