IAS 10 Events after the Reporting Period

Question

In accordance with IAS 10 Events after the Reporting Period, which TWO of the following material events must be adjusted for in Relicoz Co's financial statements for the year ended 31 October 20X4?

A. On 14 December 20X4, a storm destroyed equipment with a carrying amount of $2.1m at 31 October 20

B. On 11 November 20X4, Relicoz Co was sued by a customer over the low quality of goods supplied on 17 October 20X4; it is most likely that the customer will win the case and be awarded $530,000 in compensation

C. On 3 December 20X4, a key customer with a balance of $250,000 at 31 October 20X4 declared bankruptcy and no receipt is expected for this debt

D. On 20 January 20X5, a change in legislation led to scrapping machinery with a carrying amount of $3.4m at 31 October 20X4

adam · Accepted Answer

B & C: Under IAS 10, events after the reporting period are adjusted for when they provide evidence of conditions that already existed at the reporting date. The lawsuit relates to goods supplied before year-end, and the customer's bankruptcy provides evidence that the receivable was impaired at year-end.