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Hi sir, i just want to check with you if my undertanding is correct regarding the “events after the reporting period”
If a supplier is suing Company A for breach of contract and the lawsuit was filed prior to the year end then its considered a adjusting event right ? Because it reflects conditions existing at year end.
Likewise, if the supplier is suing Company A for breach of contract and the lawsuit was filed after the year end then it’ll be a non-adjusting even right ? Because it does not reflect conditions which existed at year end.
Your first example is really an example of whether to set up a liability or not. Nothing has happened after year end, but the liability thatmwill be needed ifman outflow of,funds is probable, or the note,that will be needed ifman outflow ofmfumds is merely possible will depend on a future event – the outcome of the law case.
Your second example could be an adjusting event if the reason for the case occured before year end. The filing of the suit provides evidence of a liability that might exist at year end.
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