CAF-6 · Chapter 1 · Question 1 of 15
A company's reporting period ends on 31 December 20X5. On 15 February 20X6, before the financial statements are authorized for issue, a major fire destroys the company's primary storage facility. How should this event be treated in the 20X5 financial statements?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Disclose the event as a non-adjusting event after the reporting period.
Explanation
Since the fire occurred after the year-end, it does not provide evidence of conditions that existed at the end of the reporting period. Therefore, it is a non-adjusting event and its effect should be disclosed if material.
More IAS 10, IAS 37 & IFRIC 1 MCQs
- Q3Delta Ltd faces claims from 20 customers for faulty products. The company estimates that each claim will be settled in the range of Rs…
- Q4Sigma Corp provides a warranty for its products. Based on past experience, there is a 60% chance of zero repair costs, a 30% chance of…
- Q5Gamma Ltd is being sued for damages of Rs. 5 million, and a provision is recognized for this full amount. Gamma expects to recover Rs. 3…
- Q6Which of the following statements regarding future operating losses is correct according to IAS 37?
- Q7Epsilon Ltd has a non-cancellable contract to purchase 500 units of raw material per month for the next 10 months at Rs. 1,000 per unit…