2024

ACCOUNTING 21

UNIT 1: ILLUSTRATIVE
FINANCIAL STATEMENTS (IAS 1)

1
 ILLUSTRATIVE FINANCIAL STATEMENTS (IAS 1
PRESENTATION ADAPTED FOR ACCOUNTING 21)
XYZ Ltd - Statement of financial position as at 31 December 20x19

(in thousands of currency units)

Note 31 Dec 20x19 31 Dec 20x18

ASSETS
Non-current assets
Property, plant and equipment 2 xxx xxx
Investment property 4 xxx xxx
Intangible assets 5 xxx xxx
Financial assets 6 xxx xxx
xxx xxx

Current assets
Inventories 7 xxx xxx
Trade receivables 8 xxx xxx
Cash and cash equivalents 9 xxx xxx

Non-current assets held for sale 10 xxx xxx

xxx xxx
Total assets xxx xxx

EQUITY AND LIABILITIES

Equity
Class A Share capital 11 xxx xxx
Retained earnings xxx xxx
Revaluation Reserve xxx xxx
Mark-to-Market Reserve xxx xxx
Total equity xxx xxx

Non-current liabilities
Long-term borrowings 13 xxx xxx
Class B redeemable shares 12 xxx xxx
Long-term provisions 14 xxx xxx
xxx xxx

Current liabilities
Trade and other payables xxx xxx
Short-term borrowings xxx xxx
Current portion of long-term borrowings 13 xxx xxx
Current tax payable xxx xxx
Short-term provisions 14 xxx xxx
Bank overdraft xxx xxx
xxx xxx
Total liabilities xxx xxx
Total equity and liabilities xxx xxx

2
XYZ Ltd - Statement of profit or loss and other comprehensive income for the year ended
31 December 20x19

(Illustrating the presentation of comprehensive income in one statement and the classification of
expenses within profit by function)

(in thousands of currency units)

Note 20x19 20x18

Revenue 14 xxx xxx

Cost of sales xxx xxx
Gross profit xxx xxx
Other income xxx xxx
Income from financial assets* 15 xxx xxx
Distribution costs xxx xxx
Administrative expenses xxx xxx
Other expenses xxx xxx
Finance costs 16 xxx xxx
Profit before tax 17 xxx xxx
Income tax expense 18 xxx xxx
PROFIT FOR THE YEAR xxx xxx
Other comprehensive income**:
Mark-to-market – financial instruments xxx xxx
Gains/(Losses) - equity investments xxx xxx
Gains/(Losses) on property revaluation xxx xxx
Other comprehensive income for the year, net of tax xxx xxx
TOTAL COMPREHENSIVE INCOME FOR THE YEAR xxx xxx

Earnings per share 19 Rx,xx p.s. Rx,xx p.s.

At UJ only the ‘one statement’-method is applied in Accounting 21.

The ‘two statement’-method shown on the next page is purely shown for illustrative purposes, as you will
not be required to apply it. Relevant however to Accounting 21 is the presentation format of
classification of expenses within profit by nature.

*Includes income from subsidiaries

**ignore tax effects for Accounting 21 and 22

3
XYZ Ltd - Statement of profit or loss for the year ended 31 December 20x19

(Illustrating the presentation of comprehensive income in two statements and classification of

expenses within profit by nature)

(in thousands of currency units)

20x19 20x18

Revenue xxx xxx

Other income xxx xxx
Changes in inventories of finished goods and work in progress xxx xxx
Work performed by the entity and capitalised xxx xxx
Raw material and consumables used xxx xxx
Employee benefits expense xxx xxx
Depreciation and amortisation expense xxx xxx
Impairment loss on property, plant and equipment xxx xxx
Other expenses xxx xxx
Finance costs xxx xxx
Profit before tax xxx xxx
Income tax expense xxx xxx
PROFIT FOR THE YEAR xxx xxx

XYZ Ltd - Statement of profit or loss and other comprehensive income for the year ended
31 December 20x19

(Illustrating the presentation of comprehensive income in two statements)

(in thousands of currency units)

20x19 20x18

Profit for the year Xxx xxx

Other comprehensive income:
Gains/(Losses) on equity instruments (xxx) (xxx)
Gains/(Losses) on property revaluation xxx xxx
Other comprehensive income for the year, net of tax xxx xxx

Income tax relating to components of other comprehensive

income. (xxx) (xxx)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR xxx xxx

4
XYZ Ltd - Statement of changes in equity for the year ended 31 December 20x19

(in thousand of currency units)

Share Retained Mark-to- Revaluation Total

capital earnings market surplus
reserve

Balance at 1 January 20x18 xxx xxx xxx xxx xxx

Correction of prior period - xxx - - xxx
errors
Restated balance xxx xxx xxx - xxx

Change in equity for 20x18

Dividends - (xxx) - - (xxx)
Total comprehensive income
for the year - xxx xxx xxx xxx

Balance at 31 December xxx xxx xxx xxx xxx

20x18
Changes in equity for 20x19
Issue of share capital xxx - - - xxx
Dividends - (xxx) - - xxx
Total comprehensive income
for the year - xxx xxx xxx xxx
Transfer to retained earnings - Xxx - (xxx) -

Balance at 31 December xxx xxx xxx xxx xxx

20x19

Please note that the Statement of Changes in Equity will only be assessed in Accounting 22 and
therefore this illustration would assist in understanding the Statement of Changes in Equity in Accounting
22 when you confront it.

5
 XYZ LTD
NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER
20X19

Corporate information

The consolidated financial statements of XYZ Ltd for the year ended 31 December 20x19 were
authorized for issue in accordance with a resolution of the directors taken on 22 March 20x20. XYZ Ltd is
incorporated and domiciled in the Republic of South Africa, and its shareholders have limited liability.

Statement of compliance

The annual financial statements have been prepared in compliance with International Financial
Reporting Standards (IFRS), Financial Reporting Guides as issued by the Accounting Practices
Committee and the Companies Act (71 of 2008, as amended) of South Africa.

1. PRINCIPAL ACCOUNTING POLICIES

1.1 Basis of preparation of financial results

The annual financial statements are prepared in accordance with the going concern and historical cost
bases except where otherwise indicated. The accounting policies are applied consistently. The
presentation and functional currency used in the preparation of the company financial statements is the
South African Rand [ZAR] (Rand) and all amounts are rounded to the nearest R’000.
Accounting policies and methods of computation:
The accounting policies and methods of computation applied in the preparation of these financial
statements are consistent with those applied in the preparation of the Companies annual financial
statements for the year ended 31 December 20x19.

1.2 Use of estimates and judgments in the preparation of annual financial statements

In the preparation of the annual financial statements, management is required to make estimates and
assumptions that affect reported income, expenses, assets, liabilities and disclosure of contingent assets
and liabilities. Use of available information and the application of judgment are inherent in the formation
of estimates. Actual results in the future could differ from these estimates and these differences may be
material to the financial statements within the next reporting period. The key assumptions concerning
estimation uncertainties at the reporting date are discussed below.

Property, plant and equipment

The Company assesses the depreciation methods, and estimates the useful lives and residual values of
these assets at each reporting date. These estimates take cognisance of current market and trading
conditions for the Company’s specific assets. In addition, the useful life estimates take into account the
risk of obsolescence due to advances in technology.

Allowances for inventories

The allowances for markdown, obsolescence and shrinkage of inventory take into account historic
information related to sales trends and represent the expected markdown between the original cost and
the estimated net realisable value. The net realisable value assigned to this inventory is the net selling
price in the ordinary course of business less the estimated costs of completion (where applicable) less
the estimated costs to make the sale. (Refer to note 1.7 and note 8 for further detail.)

Doubtful debt allowance

The Company assesses its doubtful debt allowance at each reporting date. Key assumptions applied in
this calculation are the estimated debt recovery rates within the Group’s debtors’ book, as well as an
estimation or view on current and future market conditions that could affect the debt recovery rates.

6
1.3 Property, plant and equipment

Initial recognition and measurement

Each item of property, plant and equipment is initially recognised as an asset if it is probable that future
economic benefits associated with the item will flow to the entity, and the cost of the item can be reliably
measured. Each item that qualifies for recognition is initially measured at cost, being the cash equivalent
of the purchase price and any costs directly attributable to bringing the asset to the location and
condition necessary for it to be capable of operating in the manner intended by management.

Subsequent measurement

Buildings owned by the Company are classified as owner-occupied property and carried at cost less
accumulated depreciation and/or accumulated impairment losses, if any. Land is carried at cost less
accumulated impairment losses, if any, and is not depreciated. Motor vehicles, plant, equipment,
furniture and fittings, and computer equipment are carried at cost less accumulated depreciation and/or
accumulated impairment losses, if any. When these assets comprise major components with different
useful lives, these components are accounted for as separate items. Expenditure incurred to replace or
modify a significant component of these assets is capitalised if it is probable that future economic
benefits associated with the item will flow to the entity and the cost of the item can be reliably measured.
Any remaining carrying amount of the component replaced is written off in profit or loss or derecognised
on disposal. All other expenditure is recognised in profit or loss.

Depreciation

Buildings, motor vehicles, plant, equipment, furniture and fittings and computer equipment are
depreciated to their estimated residual values on a straight-line basis over their expected useful lives.
The depreciation methods, estimated remaining useful lives and residual values are reviewed at each
reporting date. A change resulting from the review is treated as a change in accounting estimate and
depreciation is revised prospectively. The depreciation expense is recognised in profit or loss in the
depreciation and amortisation expense category. Depreciation commences when an asset is available
for its intended use and ceases temporarily if the residual value exceeds or is equal to the carrying
amount. Depreciation ceases permanently at the earlier of the date the asset is classified as held for sale
in accordance with IFRS 5 and the date that the asset is derecognised.

The following estimated useful lives apply:

Buildings 10 – 15 years
Motor vehicles 4 years
Plant, equipment, furniture and fittings 5 – 10 years
Computer equipment 5 years

Derecognition

An item of property, plant and equipment is derecognised on disposal or when no future economic
benefits are expected from its use or disposal. Gains or losses arising on derecognition are included in
profit or loss in the period of derecognition. The gain or loss is calculated as the difference between the
net disposal proceeds and the carrying amount of the item at the date of derecognition.

Impairment

Property, plant and equipment is assessed for impairment in terms of the accounting policy set out in
note 1.6.

7
1.4. Intangible assets

Intangible assets are carried at historic cost less accumulated amortisation and impairment losses.
Amortisation is recognised on all intangible assets over the expected economic useful life to the
expected residual value of zero, unless an intangible asset has no foreseeable limit to the period over
which future economic benefits will be generated.

Intangible assets are amortised on the straight line method at the following rates:

Patent (purchased) 5 – 10 years

Development costs (internally generated) 10 – 15 years

Intangible assets with indefinite useful lives are not amortised but are tested at each reporting date for
impairment. The assessment that the estimated useful lives of these assets are indefinite is reviewed at
least annually.

Patents and trademarks

Expenditure on purchased patents and trademarks is capitalised. Expenditure incurred to extend the
term of the patents or trademarks is capitalised. All other expenditure is charged to profit or loss when
incurred.

Research and development

Research expenditure relating to gaining new technical knowledge and understanding is charged to the
statement of profit or loss when incurred. Development expenditure relating to the production of new or
substantially improved products or processes is capitalised if the costs can be measured reliably, the
products or processes are technically and commercially feasible, future economic benefits are probable,
and the company intends to and has sufficient resources to complete development and to use or sell the
asset. All remaining development expenditure is charged to profit or loss when incurred.

Software
Purchased software and the direct costs associated with the customisation and installation thereof are
capitalised. Expenditure on internally-developed software is capitalised if it meets the criteria for
capitalising development expenditure. Other software development expenditure is charged to profit or
loss when incurred.

1.5. Investment Property

Investment properties are land and buildings or both held by the entity to earn rentals and/or for capital
appreciation. Properties held for resale or that are owner-occupied, are not included in investment
properties. Investment properties are measured using the fair value model (or the cost model), being:

● Investment properties are initially measured at its cost, including transaction costs. Subsequent to
initial recognition, investment properties are measured at fair value.
● Profits and losses arising from changes in the fair value of investment properties are included in
profit or loss in the period in which they arise.

1.6. Impairment of assets

At each reporting date, property, plant and equipment and intangible assets are reviewed to determine
whether there is any indication that those assets have suffered an impairment loss. If there is an
indication of possible impairment, the recoverable amount of any affected asset is estimated and
compared with its carrying amount. If the estimated recoverable amount is lower, the carrying amount is
reduced to its estimated recoverable amount, and an impairment loss is recognised immediately.

1.7. Inventories

Inventories are measured at the lower of cost and net realisable value. Cost is calculated by using the
FIFO-cost formula (or the weighted average cost formula, if applicable).
8
2. PROPERTY, PLANT AND EQUIPMENT (UNIT 2) Building Machinery
R’000 R’000
Gross carrying amount xxx Xxx
Accumulated depreciation and impairment losses (xxx) (xxx)

Carrying amount at beginning of year xxx Xxx

Additions xxx -
Borrowing costs capitalized xx
Disposal - (xxx)
Gross carrying amount - (xxx)
Accumulated depreciation and imp losses - Xxx
Gain/(loss) on revaluation (OCI) (xxx)
Depreciation (xxx) (xxx)
Historical cost (xx) -
Impairment loss recognised in profit or loss (xxx) -
Non-current asset now classified as held for sale (xxx)
Gross carrying amount (xxx) -
Accumulated depreciation and imp losses xxx -

Gross carrying amount xxx Xxx

Accumulated depreciation and impairment losses (xxx) (xxx)
Carrying amount at end of year xxx Xxx

Property with a carrying amount of Rxxx is pledged as security for the mortgage bond to the
amount of Rxxx (Refer Note X on long term borrowings).

3. IMPAIRMENT LOSS (UNIT 2)

An impairment loss on equipment resulted from adverse changes in the technological environment
in the market to which the equipment is dedicated. The recoverable amount of the equipment is its
fair value less costs to sell.

4. INVESTMENT PROPERTY (UNIT 3) 20x19 20x18

R’000 R’000

At fair value:
Balance at beginning of the year xxx xxx

Additions at cost xxx -

Capitalised subsequent expenditure xxx -
Disposal at fair value (xxx)
Fair value adjustment xx (xx)
Balance at the end of the year xxx xxx

A bond is registered over the property, with a carrying amount of Rxxx, which serves as security for
the mortgage bond of Rxxx (Refer note X on long term borrowings).

9
5. INTANGIBLE ASSETS (UNIT 3) Patent Development
costs
R’000 R’000
Gross carrying amount xxx xxx
Accumulated amortisation and impairment losses (xxx) (xxx)

Carrying amount at beginning of year xxx xxx

Additions: xxx -
Through separate acquisition xxx
Through internal development xxx

Disposal - (xxx)
Gross carrying amount - (xxx)
Accumulated depreciation and imp losses - xxx
Amortisation (xxx) (xxx)
Impairment loss recognised in profit or loss (xxx) (xxx)
Revaluation impairment loss (OCI) (xxx) (xxx)
Non-current asset now classified as held for sale (xxx)
Gross carrying amount (xxx) -
Accumulated depreciation and imp losses xxx -

Gross carrying amount xxx xxx

Accumulated amortisation and impairment losses (xxx) (xxx)
Carrying amount at end of year xxx xxx

10
6. FINANCIAL ASSETS (UNIT 5) 20x19 20x18
R’000 R’000
Listed
Fair value through profit and loss xxx xxx
100 Ordinary shares of Rx each in ACC Ltd
Fair value through other comprehensive income xxx xxx
150 Ordinary shares of Rx each in BBE Ltd

Unlisted
Amortised cost
1000 x% Debentures of Rx each in INC (Pty) Ltd. The effective xxx
interest rate is x% and interest is annualy receivable at an
installment of Rxx.

Loans and receivables xxx

Unsecured loan to ABC (Pty) Ltd at an effective interest rate of x -
% p.a. The loans is receivable in annual installments of Rxx
receivable on 31 December 2018.
- -

7. INVENTORIES (ACCOUNTING 22) 20x19 20x18

R’000 R’000
Inventories comprise:
Merchandise/Finished goods xxx xxx
Work-in-progress xxx xxx
Raw materials xxx xxx
Consumables xxx xxx
xxx xxx

The entity pledged merchandise to the value of Rxxx as security for a non-current loans (refer to
note X on long term borrowings).
Inventories to the value of Rxxx are carried at net realisable value.

8. TRADE RECEIVABLES 20x19 20x18

R’000 R’000
Trade receivables xxx xxx
Less: Impairment of trade receivables (104) (68)
Trade receivables – net xxx xxx

Allowance for doubtful debt

The movement in the doubtful dent allowance in respect of trade
receivables during the year was as follows: IFR 7.16
Balance at beginning of year 68 38
Raised during year 74 61
Utilised during year (28) (23)
Unused amounts reversed (10) (8)
Balance at end of year 104 68
xxx xxx

The carrying amount of trade and other receivables approximate their fair value. Trade
receivables have payment terms ranging between six and twelve months. The interest rates
charged fluctuate in accordance with changes to the central bank repo rate. The rate charged
during 20x19 was 20% (20.6:21%).

11
9. CASH AND CASH EQUIVALENTS
20x19 20x18
R’000 R’000
Cash and cash equivalents (excluding bank overdrafts)
Short-term bank deposits xxx xxx
Cash xxx xxx
1
xxx xxx

Cash and cash equivalents include the following for the purposes of the statement of cash
flows:

IAS 7.45 20x19 20x18

R’000 R’000
Cash and cash equivalents xxx 1 xxx
Bank overdrafts (note 31) IAS 7.8 xx xx
xxx xxx

10. NON-CURRENT ASSET HELD FOR SALE (UNIT 2) 20x19 20x18

R’000 R’000
Building xxx -
- -

It was decided during the year to sell one of the entity’s buildings as it did not satisfy the
requirements of the entity. A task team was appointed to sell the building. It is expected that the
sale will be completed within six months after the reporting date.
(If In the present reporting period, the intention to sell a building was changed and the asset was
redeployed to be used again as an administration office, after the demand for the entity’s products
increased dramatically, requiring more administrative personnel, the amount disclosed in 20x19 is
Rnil)

11. CLASS A SHARE CAPITAL (ACCOUNTING 22)

Authorised
xxxx Class A shares
Issued
xxx Class A shares xxx
xx Class A were issued during the year for which a consideration of Ryy was
received.
xx of the shares were issued to director Mr A and yy to the spouse of
director Mr B.
The directors have unrestricted authorisation [provisions of the authorisation]
to issue shares.

12
12. CLASS B REDEEMABLE SHARES (ACCOUNTING 22)
R
Authorised
xxxx 15% Class B redeemable shares xxxx

Issued
xxx 15% Class B redeemable shares xxxx

The 15% Class B redeemable shares are redeemable at the choice of the
company [or: compulsory] on 1 January 20x17 [earliest date] and at the latest
on 31 December 20x18 [latest date] at a premium of 15% [or: par]. Normal
dividend rights are maintained during the period that the shares are owned by
the shareholder.

The directors have unrestricted authorisation [provisions of authorisation] to

issue Class B shares.

13. LONG-TERM BORROWINGS (UNIT 5)

Secured
xxx 12% Debentures, secured by a first mortgage over land and buildings
with a carrying amount of Rxxx. xxxx
The debentures are redeemable as from 1 January 20x17 in five equal
instalments of Rxxx each [conditions].
xx 12% Debentures were issued during the year to director Mr A and yy to
director Mr B’s spouse.
Right of use lease

The loan is secured by equipment with a carrying amount of Rxx, held in

terms of a finance lease agreement as disclosed in note 4. The effective
interest rate is x%. The total liability is payable in x annual/monthly payments
of Rxx (including finance costs) commencing …/.../20… xxxx
Less: Amount payable within one year transferred to current liabilities (xxx)
xxxx

13
14. PROVISIONS (ACCOUNTING 22)

Employee Provision for

provisions guarantee claims
Carrying amount at beginning of period xxx xxx
Increase to provision during the period xx xx
Amounts utilized during the year (xx) (xx)
Unused amounts reversed (xx) (xx)
Carrying amount at end of period xxx xxx

Employee provisions
This provision relates to employee benefit obligations, such as sabbatical leave and long-service
benefits. The timing of these cash flows can be reasonably estimated based on past performance.
This provision is not discounted as the time value of money is not material in these matters.

Provision for guarantee claims

The company provides for the estimated liability to repair or replace products under warranty at the
time revenue is recognized. The provision is an estimate based on on historical experience of the
level of volumes, product mix, repair and replacement costs.

15. REVENUE (10)

No examinable for Accounting 21 and Accounting 22

16. INCOME FROM FINANCIAL ASSETS (UNIT 5)

Listed
Dividends xx
Fees xx
xx

Unlisted
Dividends xx
Fees xx
Interest income
Trade receivables: xx
Held-to-maturity investments xx
Bank deposits xx
Income from subsidiary
Dividend xx
Fees xx
Total income from financial assets xx

17. FINANCE COSTS

Bank overdraft xx
Interest-bearing debts x
Preference dividend (redeemable preference shares) x
xx

14
18. PROFIT BEFORE TAX (UNIT 7) 20x19 20x18
R’000 R’000

Profit before tax is shown after the following had been taken into
account, amongst others:

Income:
Income from investment property:
Fair value adjustment xxx (xxx)
Rental income xxx xxx
Gain on disposal of building xxx -
Gain on disposal of intangible asset xxx -
Reversal of write down of inventories - xxx
Recoupment from insurer i.r.o. PPE-item destroyed in fire xxx -

Expenses:

Depreciation and amortization:

Depreciation of property, plant and equipment xxx xxx
Amortisation of intangible assets xxx xxx
Total depreciation and amortisation xxx xxx
Depreciation included in the cost of merchandise sold and xxx xxx
inventories
Depreciation and amortisation expensed xxx xxx
Impairment loss xxx -
- xxx
Investment property expenses:
Properties not earning rentals xxx -
Properties earning rentals xxx xxx

Loss on disposal of machinery - xxx

Loss on disposal of intangible asset xxx -
Loss on write down of inventories xxx -
xxx -
Research costs xxx xxx
Development costs expensed xxx xxx

Employment costs:

Directors:
Executive directors xxx xxx
Non-executive directors xxx xxx
Total directors’ remuneration xxx xxx
(For further detail of directors’ emoluments refer to the
remuneration report)

15
 Low value/Short-term leases xxx xxx

Auditors' remuneration:
Audit fee – current year xxx xxx
Tax advisory and other services xxx xxx

Trade receivable costs:

Impairment losses recognised on trade receivables xxx xxx
Collection and other trade receivable costs xxx xxx

Management, technical, consulting and secretarial fees paid xxx xxx

19. INCOME TAX EXPENSE

Major components of tax expense:

Normal SA tax
Current tax - current year xxx
- previous year (over or underprovision) xxx
Total tax expense recognised in profit or loss xxx

20. EARNINGS PER SHARE (ACCOUNTING 22)

The calculation of earnings per share is based on earnings of Rxx and the weighted average of
xxx ordinary shares issued. A rights issue took place on 1 July 20x19.

[If a capitalisation issue had taken place, there must be an indication that the earnings per share
were adjusted accordingly for the preceding year - if comparative figures are required.]

Reconciliation of earnings with profit for the year:

2020 2019
R R
Profit for the period xxx xxx
Less: Preference dividend (non-redeemable preference shares) xxx xxx
Earnings attributable to ordinary shareholders xxx xxx

21. CONTINGENT LIABILITIES (ACCOUNTING 22)

The machinery of the company (value Rxx) serves as security for XYZ’s
liabilities of Rxxx.

A contingent liability exists in respect of a lawsuit against the company. It is

uncertain whether or not the company will win the lawsuit. The estimate loss
amounts to Rxxx before and Rxxx after tax.

22. CONTRACTUAL COMMITMENT

Contract for capital expenditure xx
Capital expenditure approved, but not yet contracted for xx
xxx

All capital expenditure will be financed from internal funds.

16
23. LOW VALUE/SHORT-TERM LEASE COMMITMENT (UNIT 4)

Future
operating lease
payments
R
Payable within one year xx
Payable between year one and five xx
Payable after five years xx
xx

24. RIGHT OF USE LEASE COMMITMENT (UNIT 4)

Minimum
lease Finance Present
payments cost value
Due within one year xx xx xx
Due between one and five years xx xx xx
Due after five years xx xx xx
xx xx xx

25. CHANGE IN ACCOUNTING ESTIMATE (ACCOUNTING 22)

Included in the profit before tax is a change in estimate regarding the depreciation charge. The
useful life of the plant was changed from X years to Y years. The new useful life is a more
accurate reflection of the economic benefits that will be available from the use of the asset. The
cumulative effect of the change in estimate on the current and future periods is an increase in
depreciation of Rxxx. The effect of the change in estimate is a decrease in profit of Rxxx.

Increase in depreciation (xxx)

Decrease in tax expense xxx
Decrease in profit for the year (xxx)

26. PRIOR PERIOD ERROR (ACCOUNTING 22)

Bad debts have not been provided for (applicable year). The amount of bad debts for (applicable
year) amounted to Rxxx. The effect for the period ended (applicable year) was as follows:

Increase in bad debts (xxx)

Decrease in tax expense xxxx
Decrease in profit for the year (xxx)

Decrease in Accounts Receivable (xxx)

Decrease in Tax payable xxxx
Decrease in Equity (xxx)

26. EVENTS AFTER REPORTING PERIOD (ACCOUNTING 22)

On 20 February 20x20, the board of directors decided to sell a building following damage in a
thunderstorm. The entity is in the process of finding a buyer and it is expected that the sale will be
completed by the end of July 20x20.

17