QUESTION 9 X Ltd is dependent upon its software to process its purchases and sal

Question

QUESTION 9 X Ltd is dependent upon its software to process its purchases and sale transaction and has a year end of 31 January. On 15 January 20.5, X Ltd approached a computer consultant to establish whether or not its software is compliant with its own new open source operating system. On 31 January 20.5, the consultant informed X Ltd that the software is not compliant and that X Ltd would need to spend about N$3 million to make its software compliant. The financial director of X Ltd has decided to provide for the amount of N$3 million in its accounting records for the financial year ended 31 January 20.6. X Ltd has not yet appointed a contractor to do the modifications. Required Discuss the financial director’s decision to provide for the amount of N$3 million in the financial statements of X Ltd for the year ended 31 January 20.6. You must assume that the amount is material. Justify your answer by only referring to the requirements of the Framework.

Explanation / Answer

If we discuss it based upon the qualititave requirements than, however since the contractor also is not been appointed yet the recording of amount is not correct and financial director should take following characteristics into consideration:

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