Fruitcorp Ltd Has Been Negotiating a Merger with a Company

question 19

Multiple Choice

Fruitcorp Ltd has been negotiating a merger with a company that is currently its major supplier.Subsequent to reporting date the merger agreement is finalised.The merger materially affects the size and structure of the new entity and should bring substantial economic benefits to all shareholders.How should this event be reported according to AASB 110?

• A) The size and significance of this event is such that it should be fully reflected in the financial accounts. New group accounts should be prepared to reflect the actual economic entity that exists at the time of completion of the financial reports.
• B) No disclosure is required.
• C) A description of the event, the fact that it occurred after reporting date and its financial effect on the company should be disclosed by way of a note to the accounts.
• D) Disclosure of the event in the Directors' Declaration is required.

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Definitions:

Recovery

The phase in the economic cycle where output and employment grow following a recession, leading to increased economic activity.

Industrial Plant Intact

An industrial plant intact refers to a manufacturing or processing facility that remains fully operational, undamaged, and capable of continuing its production activities without interruption.

Stock

Financial instruments that represent ownership in a company or a corporation, entitling the shareholder to a proportion of its profits.

Mass Consumption Society

A society characterized by the widespread purchasing and use of large quantities of goods and services, typically those advertised and available in a variety of brands.