Practice Question Events After the Reporting Period

Alberto Bhd is a large manufacturing company. After the date of the balance sheet, but prior to the financial statements being authorised for issue, the following material events occurred:

1) It was discovered that an account receivable existing at the balance sheet date will now not be received.

2) Alberto Bhd announced a bid to take over its competitor.

3) Some material errors were discovered in the financial statements, which indicate that the financial statements are incorrect.

4) The factory workers at the company have started a strike action for an indefinite length of time. The factory has to temporarily stopped production as a result of the workers action.

Required:

Define an adjusting event and non-adjusting event after the balance sheet date, and explain how each event should be accounted for in accordance with IAS 10 / MFRS 110 Events after the Reporting Period.

For each of the events described in the Albatross Bhd case, state whether they should be accounted for as an adjusting or non-adjusting event after the balance sheet date. Justify your answer with reference to IAS 10 / MFRS 110 Events after the Reporting Period.