Cavalier Co Ltd Is Being Sued for Negligence in Manufacturing

question 6

Multiple Choice

Cavalier Co Ltd is being sued for negligence in manufacturing a piece of equipment that has allegedly resulted in injury to an employee of the claimant business.The accident occurred after reporting date,but Cavalier has settled quickly so the outcome is now known before the authorisation date of the financial statements.The settlement is for a material amount.How should this transaction be recorded in the financial statements according to AASB 110?

• A) The event should be disclosed in a note to the financial statements.
• B) The event should be fully reflected in the financial statements as the outcome is complete and known before the time of completion of the reports.
• C) No reporting is required.
• D) The event should be disclosed in a note to the financial statements and fully reflected in the financial statements as the outcome is complete and known before the time of completion of the reports.