Events after the reporting period

How many are you looking for – one or two?

I ask because your question is asking for MORE than one

On what date did these events occur (with reference to the financial year end) – before the year end or after

The second option is unclear – were the claims before the year end, or was it the payments that were before the year end

Finally, what’s the problem with the printed solution? In other words, do you want me to explain to you why your choice is not correct according to the solution? If so, tell me your choice and I’ll explain why it’s not correct

That is a most improbable answer to an exam question – you will never be asked to select 3 options out of 4

The question must surely have been “Which of the following is NOT an adjusting event?” or, if there are two non-adjusting events, “Which of the following are NOT adjusting events?”

IF, and you don’t always, IF you have typed the question correctly and IF you have given me the FULL question as it is written, (so, on the basis of potentially incomplete information,) it depends!

For example, consider option 1. This customer of ours who owed us $80,000 when he declared himself bankrupt “after the end of the reporting period but before the financial statements were approved”

At the year end, this customer owed us $4,300 and that amount was settled in full by payment on 15 January. Since then, we have sold to this customer a further $125,673 worth of goods and the customer has paid to us, since 16 January, a total amount of $119,650

On 14 April we hear that the customer has declared himself bankrupt and, on that date, there is an amount outstanding from that customer of $6,013

That’s a potential scenario for option 1

Is that an adjuster or a non-adjuster? You tell me

For option 2, had we made provision for the court claims on the basis that they represented a probably liability or were we merely going to disclose them?

If we had already made provision in the draft financial statements, then the settlement of the liability will have no affect on the results for the year. The only effect is that assets (cash) are overstated and liabilities (provision) are overstated because the double entry to settle the liability for which provision has already been made is:

Dr Provision
Cr Cash

If, on the other hand, no provision had been made, then that certainly looks like an adjusting subsequent event

Option 3 certainly is not an adjusting event (unless going concern has been affected) whilst

Option 4 certainly IS an adjusting event (it’s actually a non-adjuster but is treated as an adjuster because of the impact on going concern)

What choices does the question offer in terms of “Select one out of four choices” – for example

i) 1 and 2
ii) 2 and 3
iii) 3 and 4
iv) 1 and 4