Event After Balance Sheet Date

[PRiYO]

I Need Some help with this question.

Which of the material events after the balance sheet date and before the financial statement are approved are adjusting events?

1. All valuation of property providing evidence of impairment in value at the balance sheet date.

2. Sale of inventory held at the balance sheet date for less then cost.

3. Discovering of fraud or error effecting the financial statements.

4. The insolvancy of a customer with a debt owing at the balance sheet date with is outstanding.

Answers :

(A) 1,2,3 & 4

(B) 1,2 & 4 only.

(C) 3 & 4 only.

(D) 1,2 & 3 only.

[Acid]

Hi Priyo,

I will explain you the IAS 10 - Events after the reporting period and with the help of that you should be able to find the correct answer .



- Events after the balance sheet date : are events , both favourable and unfavourable , that occur between he balancesheet date and the date of approval of the accounts.

- Adjusting events are post balancesheet events which provide additional avidence of conditions exisiting at the end of balance sheet date.

- Non adjusting events are post balancesheet events which convern conditions not existing at the end of balancesheet date.



The financial statements should be changed to include the events balancesheet date if they are adjusting events.


Now use this information an apply it to the question , shake your head a bit and try to get me the answer.

Regards,

Acid

[PRiYO]

My Answers was C) 3 & 4 Only But it says its wrong :(

[Acid]

Hi there,

I THINK the correct answer should be (A) 1 ,2 , 3 and 4 ONLY.

Let's find out why I think the answer is A .


>> 1. All valuation of property providing evidence of impairment in value at the balance sheet date.

The Property was valued at the Balance sheet date means that If thing related to this property valuation occuring after the balance sheet date should be adjusted for in the accounts.

>> 2. Sale of inventory held at the balance sheet date for less then cost.

IAS 2 Inventories govern that inventory should be valued at lower of cost and NRV. So that means @ balance sheet date , the NRV of the inventory was ESTIMATED ( means a condition of estimation at balance sheet date was present ) and the actual NRV was less . So It's an adjusting event because the NRV was lesser then the cost.

>> 4. The insolvancy of a customer with a debt owing at the balance sheet date with is outstanding.


The bad debt amount was estimated at Balance sheet date , again means that the condition was present at the balance sheet date so that means that it must be an adjusting event.

>> 3. Discovering of fraud or error effecting the financial statements.

Did you know at the balance sheet that there is an fraud or an error ? Yes ? Then you must have taken account for it .

No ? Then you were unaware of this and the condition wasnt present at the balance sheet date. So this must be an non adjusting event and should be disclosed by the way of notes to the financial statements.


HEALTH WARNING: Take the answer and explaination if the correct answer is A . If thats wrong then tell me and I'll immediately remove the post!


Best regards,

Acid

[PRiYO]

The Original Answer says 1, 2,3& 4 all were right

But i was confused about the 1 and 2 thankz acid :)

[limit_to_infinity]

yeah the answer is really 1 2 3 and 4

as regards 1 , i read that if the property is valued for the purpose of revaluation then its a non adjusting event howver if the intention was to find out the impairment loss , its adjusting event

its in ICAP,s examiner comments .Dont know about its validity
regards