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ACCA Applied Skills · Financial Reporting · Provisions and events after the reporting period

Which of the following events occurring after the reporting period but before the financial statements are authorised for issue is a non-adjusting event requiring disclosure if material?

The warehouse fire is the non-adjusting event. It arose after the reporting date and does not provide evidence of conditions existing at that date, so IAS 10 requires disclosure of its nature and estimated financial effect if material, not adjustment of the recognised amounts.

  1. AThe settlement of a court case for which a provision was recognised at the year end
  2. BA fire that destroys the entity's main warehouse after the year endCorrect
  3. CThe discovery of an error in the inventory count at the year end
  4. DThe sale of inventory at below cost, which had been carried at cost at the year end

Explanation

A fire after the reporting date reflects a condition arising after that date, so it is non-adjusting and disclosed if material. The court settlement, inventory count error and below-cost sale of year-end inventory all give evidence about conditions at the reporting date, so they are adjusting.

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