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Hi Tutor,
I am pretty much confused when it comes to subsequent events although i know the definition of adjusting and non-adjusting events. Could you please tell me what should be an approach to determine whether subsequent event is adjusting or non-adjusting event?
It is adjusting if the event merely gives vidence about a state of affaris at the period end.
So a debt going bad on 15/1/2016, that was in receivables as at 31/12/2015. It must have been non-recoverable on 31/12 if only we had known.
Or, stock costing $2000 in inventory as at 31/12/15 being written down to $500 on 5/1/2016 to try to sell it. I must have had an NRV of $500 on 31/12 if only we had knonw it.
However, if there was a fire on 5/1/2016 and invnetory of vlaue $25,000 as at 31/12/2015 was destroyed, then this is non-adjusting: the invnetory was perfectly OK on 31/12.
Dear Mr Gromit,
Continue to mini’s question above, normally I see that a lower sale price of inventory after year end is often treated as adjusting event. But if the reason for the lower price is not of obsolesce or bad quality but due to the bad market condition (happens after year end), could we still treat it as adjusting event?
Hi, If the fire was before the reporting date, for example at 30.12.2015, it should be adjusted right?
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