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Sir, I had watched ur lecture on Ias 10 and i had a question abt it.
Now you always tell that in order to decide whether an event is adjusting or non adjusting one, we must ask ourself
” what would we do if we knew about this event at Reporting date, that this event is going to take place in near future, do we change our accounts or not at year end for this event”
Now i have a question that we have made a Provision in our account with reapect to legal matter and court gives its decision after reporting date, now accounting to this rule how can we solve it ?
Provided that the court gave its decision before the accounts became final, then you would change (adjust) the accounts and either remove the provision completely or change it into an accrual (depending on what the decision was).
Ok i got that, but i wana know one more thing, lets suppose fire take place after year end.
Now according to your rule must think that would we change accounts at year end , if we know at year end that fire will take place later ?
The answer is no because at year end date factory was exisiting so we must no change the accounts, fair enough.
Now, i wana put an other example here
Lets suppose we have provision for damages in our year end accounts, and court gives decision after reporting period that we are not suppose to pay any money
Now, according to your rule we must think that will we change our accounts at year end, if we knew at year end that we wont be required to pay money later
According to book ans is yes, but i wana know why would we change our account at year end, why would we end provision at year end given the fact that court make the decision after year end, why would we end provision at year end ?
Now in factory example you said that factory was not set up on fire at year end thats why we didnt adjust it, fair enough
But here, in example 2 court decision also came after the year and, not at year end than why are we adjuting it into accounts? Isnt it Contradiction in rule?Thanks for ur precious time
There is no contradiction.
In the case of the fire, the building did exist at the year end and must therefore appear in the accounts (but we would have a note explaining that the building had been destroyed later). Even if we had known at the year end that there was going to be a fire later, the fact remains that the building did exist at the year end.
In the case of the provision, it was only there because we thought we might have to pay money but did not know for sure. If we had known at the year end that the court would decide we did not know anything, then we would not show anything as owing.
There is no contradiction.
In the case of the fire, the building did exist at the year end and must therefore appear in the accounts (but we would have a note explaining that the building had been destroyed later). Even if we had known at the year end that there was going to be a fire later, the fact remains that the building did exist at the year end.
In the case of the provision, it was only there because we thought we might have to pay money but did not know for sure. If we had known at the year end that the court would decide we did not know anything, then we would not show anything as owing.
Ok, i wana ask a last questiom from you to end up this topic, by the way thanks for ur patience 🙂
Lets suppose we havent made provision at year end, and after reporting period we got to know that we have lost case and are suppose to pay money
Now, if we knew at reportinng date that we are suppose to pay the amount afterwards, then we would have made the liablity in our accounts, so for that reason it should be adjusting event, as per ur answer above and ur lecture, am i right ?
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