Question

1. How would you define the two types of events that occur after the reporting period?

2. What are the potential accounting effects of each type?

Answer 1

1. How would you define the two types of events that occur after the reporting period?

Events may occur after the reposting period but before producing the financial statements. Such type of events are of 2 types as follows.

Adjusting Events: Events that provide pre existed conditions before the date of the reporting date are called Adjusting events which requires the adjustments in the financial statements.

Non Adjusting Events: Non Adjusting events are those which provides the information about the existence of the conditions after the reporting date. such events does not require any adjustments in the financial statements.

2. What are the potential accounting effects of each type?

1) Adjusting Events are to be accounted making adjustment entries as it affects the decision making of the financial users.If the evnt is not recognized initially, it should be disclosed in Contingent Assets and Liabilities section.

2)Non Adjusting events does not have does not have the conditions existed before the reporting date and hence does not require for any adjustments in the financial statements.If it is a material and effects the decision of the users then it should be disclosed in the foot notes of the financial statements.