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SECTION A - CASE 2: AERODYNAMICS LOGISTICS
AeroDynamics Logistics is a drone delivery startup. You are the audit senior for the year ended 30 September 20X6. During the audit, you note the following:
- The company has a significant cash burn rate and its main operating license expires in two months, with renewal pending a safety review.
- On 15 October 20X6, a major warehouse fire destroyed 40% of their drone fleet.
- A key customer, accounting for 25% of revenue, declared bankruptcy on 5 November 20X6.
The financial statements are due to be signed on 30 November 20X6.
Which TWO of the following are operating indicators that AeroDynamics Logistics may not be a going concern? (Select TWO)
ACCA · Question 07 · Review and Reporting
SECTION A - CASE 2: AERODYNAMICS LOGISTICS
AeroDynamics Logistics is a drone delivery startup. You are the audit senior for the year ended 30 September 20X6. During the audit, you note the following:
- The company has a significant cash burn rate and its main operating license expires in two months, with renewal pending a safety review.
- On 15 October 20X6, a major warehouse fire destroyed 40% of their drone fleet.
- A key customer, accounting for 25% of revenue, declared bankruptcy on 5 November 20X6.
The financial statements are due to be signed on 30 November 20X6.
How should the warehouse fire on 15 October 20X6 be treated in the financial statements for the year ended 30 September 20X6?
SECTION A - CASE 2: AERODYNAMICS LOGISTICS
AeroDynamics Logistics is a drone delivery startup. You are the audit senior for the year ended 30 September 20X6. During the audit, you note the following:
- The company has a significant cash burn rate and its main operating license expires in two months, with renewal pending a safety review.
- On 15 October 20X6, a major warehouse fire destroyed 40% of their drone fleet.
- A key customer, accounting for 25% of revenue, declared bankruptcy on 5 November 20X6.
The financial statements are due to be signed on 30 November 20X6.
How should the warehouse fire on 15 October 20X6 be treated in the financial statements for the year ended 30 September 20X6?
Answer options:
As an adjusting event, requiring the write-down of the drone fleet in the statement of financial position.
As a non-adjusting event, requiring disclosure in the notes to the financial statements if material.
It should be ignored as it occurred after the reporting date.
As an adjusting event, requiring a provision for replacement drones.
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