Explain which of the following items is material in accordance with the requirements of

AASB 108 ‘Accounting Policies, Changes in Accounting Estimates and Errors’.

(a) During a routine computer system check, it was discovered that corruption of sales

data had led to an understatement of sales revenue by $180 000 for MattCom Ltd

during the reporting period ended 30 June 2018. Total sales revenue for the period

was $1 500 000.

(b) MattCom Ltd issued 500 5% $100 debentures during the reporting period ended

30 June 2013. At the time of issue, the market value of each debenture was $100.

At 30 June 2018, total liabilities were equal to $1.25 million. The issue of the

debentures significantly increased the likelihood of MattCom Ltd failing to meet

the required interest coverage ratio specified in a loan agreement with Portsmith

Bank.

(c) Would your answer to (b) change if the loan agreement with Portsmith Bank did not

specify a minimum level for MattCom Ltd’s interest coverage ratio?

(d) During the reporting period ended 30 June 2018, the financial situation of MattCom

Ltd deteriorated significantly due to increased competition and a shrinking market for its products. There is no evidence that MattCom’s situation will improve in the

future. During this time, the directors revalued equipment upwards by $47 000. At

the time of revaluation, recorded equity was $940 000.