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October 18, 2022 at 2:14 pm #669187MichelleJ
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Sir I need your help on IAS 10 regarding adjusting and non-adjusting events.
1) Is it true that we look whether we had the information and evidence about the future event at the reporting date?
2) Is it true that in both adjusting and non-adjusting cases the event happened after the year-end but the evidence existed at reporting date will prove whether it is adjusting event or non-adjusting event?
3) But what kind of evidence are we looking here?
4) You did explain that we need to ask two questions to ourselves but i didn’t understand them. Please explain it?
5) What is Going concern and what relevancy it has with IAS 10? Do we need to adjust our accounts for this – but how?
6) Can we say that any event that happened after the year-end but it is related to previous accounting year is an adjusting event?
For eg customer was bankrupt but we had his balance on our accounts at the reporting date?
7) You explained that issue of shares is a non-adjusting event but we might have an announcement before the company issue shares – so why it is not an adjusting event?October 18, 2022 at 4:32 pm #669211John MoffatKeymaster
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First 4 questions:
An event is adjusting if we would have changed the values in the SOFP had we known the extra information. (I give examples in my lecture e.g. if we had known that a debtor was going to go bankrupt we would have either written off the debt or would have made an allowance; if we had known that inventory was going to be sold for less than the cost we would have valued it at the lower).
5. I explain the going concern concept in my lectures. We prepare the statement assuming that the business is going to continue in business (and therefore for example we usually value inventory at cost because usually it will be sold for a higher price. If the business was going to close down then inventory might well have to be sold off for less than cost and so would be valued at the lower because of IAS10). For the exam you will not be asked for ‘numbers’ just understanding of the concept.
6. It depends what you mean by ‘related’ so best not to say it! Your example is an adjusting event and is an example I use in my lecture.
7. It is only an adjusting event if the shares had been issued before the year end. If they had not been issued then they cannot appear on the SOFP because they didn’t exist! (But it would be disclosed by way of note).
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