Teign Ltd prepares its financial statements to 30 September each year . The following events took…

Teign Ltd prepares its financial statements to 30 September each year. The following
events took place between 30 September and the date on which the financial statements
were authorised for issue.
(i) The company made a major purchase of plant and machinery.
(ii) A customer who owed the company money at 30 September was declared bankrupt.
Which of the above is likely to be classified as an adjusting event according to IAS
10 Events After the Reporting Period?

Q7- You have been asked to help prepare the financial statements of Merched Ltd for the year
ended 31 March 20X3. Legal proceedings have been started against the company
because of faulty products supplied to a customer. The company’s lawyers advise that it is
probable that the entity will be found liable for damages of £250,000.
Explain how you would treat the probable damages arising from the legal
proceedings in the financial statements. Refer, where relevant, to accounting
standards.