Methanex Kitiman Announces Plans to Close Kitiman - Essay Example

Recognize the event, not recognise-There is a binding agreement between the two parties-The value of the contract or agreement can be estimated i.e. can be measured from the capacity.-The event will have a direct impact on key ratios. This is because it affects sales, and costs.-The performance of the agreement has not been affected. This is until Jan 2006.-Prudence's concept of accounting discourages recognition of un accrued benefits. Recommendation: The company should only disclose the event as a note in the financial statements.4. Alternative treatment referring to the Generally Accepted Accounting Principles together with the International Accounting standards on Contingent Liabilities and Assets, would also be in order if the company decides to completely omit this event in its financial statements for the current year.

This is because the said event will not affect the transactions of the year (If it ends on 31st December) but the transaction of the coming year.5. Conclusion on how the event should be accounted for. The management of Methanex Corporation should disclose the above event as a contingent asset in the financial statements. This is if the event will fundamentally change the operations of the company and the profits thereof i.e. if the event is material in nature.