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I watched ur lecture but it’s hard for me to understand. Could you please explain in simple words how to distinguish between adjusting & non-adjusting events.
Please say which of my statement regarding adjusting event is correct…
Adjusting event is:
1) Did we know or have evidence at reporting date about the future event.2) It gives evidence that at the reporting date we knew that future event is caused by something related to the 12 month period.
3) We simply need to see that if we knew what was going to happen in future then should we adjust them or not.
4) If we had known at the year-end that this event would happen – then we need to ask ourselves whether we should adjust it or not.
Thanks!!!
Statement 4 is correct. If we had the information at the year end then would we have shown anything differently in the statements or not.
1) Factory was burned by fire:
IF we had the information at the year-end that factory would be destroyed in future – we would have not adjusted it because the factory existed at reporting date but burned in another period.But the next year we will reduce our non-current assets by $1m as the cost of factory.
2) Customer went bankrupt:
IF we had the information at the year-end that customer will not pay us – we would have written-off as irrecoverable debt.3) Errors found in books:
IF we had the information at the year-end that there is an error in our book – we would have adjusted it.4) Inventory sold for lower of cost:
IF we had the information at the year-end that inventory is valued wrongly (not according to IAS 2) – then we would have adjusted it by correcting.5) New shares were issued:
IF we had the information at the year-end that new shares are issued – we would have not adjusted it because it happened after the reporting date for which we have no information about at year-end because it does not change our financial statement how we show it.6) Dividend was announced but issued after year-end:
If we had the information at the year-end that dividend will be issued – we would have not adjusted it because the shares were issued after the year-end and we had no information about it at the year-end.Sorry for a lengthy question. Thanks for your time SIR 🙂
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