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Adjusting/Non-adjusting events

ZZumrud2y ago
Good day! A fire six weeks after the year end has destroyed all the inventory. Inventory consisted of perishable goods with a shelf life of 10 days. Is this adjusting entry if all the inventory is destroyed?
John MoffatJohn MoffatTutor2y ago#1
Presumably the inventory will not have been included in the financial statements because the NRV was zero after 10 days. If they had been included in inventory then the statements do need adjusting. What does the answer say in the book in which you found this question?
ZZumrud2y ago#2
The answer says "The fire is a non-adjusting event because it does not change any of the figures in the accounts at the year end. If material, which is likely, it should be disclosed in the notes to the financial statements." I thought it was adjusting event because it might affect going concern as all inventory had been destroyed by fire.
John MoffatJohn MoffatTutor2y ago#3
The inventory will have been valued at zero anyway. It is unlike to effect going concern because their inventories always have limited life.
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