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2 marksSocial, Ethical, and Reporting Considerations

CAPE Accounting Unit 1 · 2021 · Paper 2 · Question 3(b)(i)

Tai Ltd's financial year ended on 31 December 2020 and its financial statements were approved on 31 March 2021. Post-balance sheet events during January–March 2021 included: • Tai Ltd acquired the entire share capital of Payne Ltd for $600 million. • Debentures were issued to cover a portion of the acquisition cost of Payne Ltd. • A valuation report for a property revealed a permanent diminution in value.

Define the term 'adjusting events', according to Section 32 of the IFRS for SME (IAS 10) events after the reporting period.

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  1. 3(a)(i)Outline the effects of inflation on financial statements, specifically relating to Closing inventory.[2 marks]
  2. 3(a)(ii)Outline the effects of inflation on financial statements, specifically relating to Depreciation.[2 marks]
  3. 3(a)(iii)Describe the current cost accounting method which may be used as an alternative to historical cost accounting in areas of high inflation.[3 marks]
  4. 3(b)(ii)Identify how EACH of the THREE bulleted post-balance sheet events above should be reflected in the financial statements of Tai Ltd for the year ended 31…[5 marks]
  5. 3(c)Using the indirect method, prepare a statement of cash flows for the year ended 31 December 2020, in accordance with Section 7 IFRS for SMEs (IAS 7).[21 marks]

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