- This topic has 3 replies, 2 voices, and was last updated 6 years ago by
.
- Posts
How can we classify and justify the following events as adjusting or non-adjusting?
1) evidence of impairment of assets;
2) sale of inventories at prices suggesting the need to reduce the figure in the Statement of Financial Position to the net value actually realized;
3) discovery of fraud or errors that show the financial statements were incorrect
4) a decline in market value of investments;
5) an announcement of a plan to discontinue part of the enterprise;
6) major purchases and sales of assets;
7) destruction of a major asset by fire etc;
8) sale of a major subsidiary;
9) major dealings in the company’s ordinary shares;Please do not set me test questions and expect an answer. If you found this in a book, then there will be an answer in the same book – ask me about anything you are not clear about in the answer and I will explain. (If you did not find the question in a book, then I am not clear why you are asking 🙂 )
Everything needed on this for the exam is explained, with examples, in my free lectures on events after the reporting period.
The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
I did watch the lecture. I just am unable to recognize as WHY an event is adjusting or non-adjusting. I can not justify the WHY in the examples that I just mentioned above.
The lecture example of the factory on fire I understand that at the period end we did not know it would happen and so it is non-adjusting.
Based on this logic, if we consider the rest of lecture examples(error discovery, customer bankruptcy, inventory sale on less than cost) we did not know about any of those events at the period end either so why aren’t they non-adjusting as well?Kindly tell me how can I identify WHY an event is adjusting or non-adjusting.
Events after the reporting date are things they did not know about at the reporting date! That is not relevant.
If they affect the value as at the reporting date, then we adjust (so things like errors made before the reporting date or the value of inventory as at the reporting date being wrong). If it does not affect the value as at the reporting date then we do not adjust but disclose by note if material (so things like a fire destroying the factory – it was there at the reporting date so we do not adjust).
- The topic ‘IAS 10’ is closed to new replies.