Section A

Which TWO of the following are classified as adjusting events after the reporting period under IAS 10?

Answer options:

The bankruptcy of a major customer shortly after the year-end, relating to a debt outstanding at the year-end

A major fire destroying the company's main warehouse two weeks after the year-end

The declaration of an ordinary dividend after the reporting period

The discovery of a fraud that shows the financial statements are incorrect

How to approach this question

Identify events that provide evidence of conditions that existed at the end of the reporting period (adjusting) versus events that arose after the reporting period (non-adjusting).

Full Answer

Adjusting events provide evidence of conditions that existed at the end of the reporting period. A customer going bankrupt confirms a year-end receivable was impaired. Discovering fraud confirms the year-end figures were wrong. Fires and dividend declarations after year-end are non-adjusting.

Common mistakes

Treating dividends declared after year-end as an adjusting event.

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Practice the full ACCA FA — Financial Accounting Practice Exam 1

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