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Hi Tutor,
Could you kindly explain how is discovery of fraud or error an adjusting event?
And how could major purchases and sales of assets be non adjusting event? Keeping in mind that such decisions aren’t taken over night..Thanks
If the error or fraud had made before the year end it will be adjusting.
By major purchases of assets, I assume you mean purchases unrecorded at the year end. If you buy an asset after the year end it is non-adjusting.
Right. Lets suppose you buy an asset after year end, but how can it be that you just randomly made a decision of buying it? You must have done some cost-benefit analysis, must have took some major decisions as the assets we are talking about costs a lot. So apparently at the year end you must be knowing you are going to buy some assets??
I think you need to go back to the financial reporting notes and lectures as this is a fundamental misunderstanding. Assets are not recognised until they are received by the business. An adjusting event is one which tells you about the financial position of the business at the year-end.
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