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

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.