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ACCA Applied Knowledge · Financial Accounting · Events after the reporting period

Ruby Co's reporting date is 31 March 20X6. Financial statements were authorised for issue on 20 June 20X6. Which of the following events occurring after the reporting date would be an adjusting event?

The customer's insolvency, arising from conditions existing at 31 March 20X6, is the adjusting event. It provides evidence about the recoverability of a receivable at the reporting date, so the balance is written off. The fire, dividend and share issue are non-adjusting events.

  1. AA fire on 10 May 20X6 destroyed the main warehouse
  2. BThe directors declared a final dividend on 5 May 20X6 for the year to 31 March 20X6
  3. COn 2 May 20X6 a major customer was declared insolvent, due to conditions existing at 31 March 20X6, owing $40,000 included in receivablesCorrect
  4. DA new share issue on 1 June 20X6 raised $500,000

Explanation

Customer insolvency evidences a condition that existed at the reporting date, so the receivable is adjusted (written off). A fire, a dividend declaration and a share issue arose after the period and relate to new conditions, so they are non-adjusting.

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