Question
ASA560 Subsequent events provides guidance as to when events should be reflected in the financial statements and how to treat them. The two types of
ASA560 Subsequent events provides guidance as to when events should be reflected in the financial statements and how to treat them. The two types of events that occur after the reporting date (30 June 2022) are adjusting events and non-adjusting events.
Scenario 1
You are the auditor of company X. Company X has an investment of shares in a listed company. The fair value of the shares as at 30 June 2022 based on the listed market price is $3,000. By 30 August 2022, the listed market price of the shares has fallen significantly, and the fair value of the investment is $1,200.
Scenario 2
You are the auditor of Company A. As at 30 June 2022, Company A is owed $500,000 by Company B from the sale of goods supplied in January 2022. On 12 August 2022, Company A receives a letter from Company B's administrators advising that Company B is likely to enter liquidation and Company A is unlikely to receive payment for the amount it is owed and $500,000 is material.
a.Scenario 1: Adjusting event
Scenario 2: Adjusting event
b.Scenario 1, Non-adjusting event
Scenario 2: Non-adjusting event
c.Scenario 1: Adjusting event.
Scenario 2: Non-adjusting event.
d.Scenario 1: Non-adjusting event
Scenario 2: Adjusting event
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