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Mml Case

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With regards to the potential purchase of MML, analysis of the financial statements and notes from discussion with MML Management was completed. The following memo pertains to the suggested journal entries and notes to the financial statements to address the concerns under IFRS.

Loss during the year
MML’s loss during the year is a one-time event and not considered an ordinary course of business. However, not enough information was provided to determine whether the loss was dependent on the decisions of the owners. Under the assumption that the loss was not a result of management actions, this loss would be classified as an extraordinary item (SOURCE - 387). As per IFRS, extraordinary items are no longer reported thus entries and notes to the financial statements are not required.

The acquisition of MML necessitates John to consider whether the business will continue to operate in the foreseeable future. Since the loss has caused a reduction in the current year’s operating profitability, it is essential to consider the “going concern” assumption (SOURCE- chapter 2 387). MML will need to provide a disclosure of any material uncertainties with regards to the continuity of the company, which will provide financial statement users with more relevant and faithful representation of information (SOURCE - Chapter 2).

“MML experienced a $500,000 reduction of operating profitability from a non-recurring transaction. It is predicted that MML will return to profitability within the next 12 months, reducing the potential risks that can impact the future viability of business operations.”

New Lease Agreement
MML’s new lease agreement is considered to be a finance lease. MML currently has a bargain purchase option, and it is assumed that the company will exercise it at the end of the lease term and obtain ownership of the asset. The lessor will also recover all of

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