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Homework answers / question archive / Question 16 of 10 Question 16 points Ron Ltd is in the process of completing its financial reports for the period ended 30 June 2020 when a new law has been enacted on August 2020 that company income tax rates are to be increased by 24
Question 16 of 10 Question 16 points Ron Ltd is in the process of completing its financial reports for the period ended 30 June 2020 when a new law has been enacted on August 2020 that company income tax rates are to be increased by 24. What treatment is required by ASB 110 to account for the change in the income tax rate! O No disclosure is required because the information is publicly available Oi material, the financial statements should be adjusted to reflect the impact of the event The potential effect on the accounts should be disclosed in the notes to the financial statements O An adjustment to the statement of comprehensive Income should be made, but only note disclosure for the statement of financial position since is prepared as the reporting date Moving to another question will save this response
Solution:
The potential effect on the accounts should be disclosed in the notes to the financial statements.
Explanation: As per the provisions contained in AASB 110 Events after the reporting period, if non-adjusting events after the reporting period are material, non-disclosure could influence the economic decisions that users make on the basis of the financial statements. Accordingly, an entity shall disclose the following for each material category of non-adjusting event after the reporting period:
(a) the nature of the event; and
(b) an estimate of its financial effect, or a statement that such an estimate cannot be made.
One of the example of such non adjusting event is: Changes in tax rates or tax laws enacted or announced after the reporting period that have a significant effect on current and deferred tax assets and liabilities.
