An entity has a year ended 31 march 20X4 and the financial statements were approved by the directors on 31 August 20X4.
Statement) The enterprise had made large export sales to the USA during the year. The year-end receivables included $2 million for amounts outstanding that were due to be paid in US dollars between 1 April 20X4 and 1 July 20X4. By the time these amounts were received, the exchange rate had moved in favour.
Hi sir, why is the above statement a non-adjusting event ? Is it because at the year end we had no clue that the exchange rates are going to move in favour ?
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Non-adjusting event
9y ago#1The short answer to this question is "Yes"
An adjusting subsequent event is one that "relates to a condition or situation that DID exist at the date of the statement of financial position and fixes with greater certainty an amount or estimate as at the date of the statement of financial position"
Basically there are two types of subsequent events:
1) those that provide ADDITIONAL information about a condition or situation or fix with greater certainty amounts or estimates (adjusting ) ..., and
2) those events that are new ie they do NOT relate to a condition or situation that existed (non-adjusting) ....
The situation in your question relates to the translation of a foreign currency and (correctly) uses the exchange rate AS AT the year end because that is the condition or situation that DID exist as at the year end
The favourable movement in the exchange rate is a non-adjusting event the correct treatment of which, should it be material, is to disclose by way of note to the financial statements
OK?
Got it sir. Thank you.
9y ago#3You're welcome
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