CAF-6 · Chapter 1 · Question 8 of 15
An entity has a customer who owed Rs. 500,000 at the reporting date of 31 December 20X4. On 20 January 20X5, before the financial statements are authorized for issue, the customer goes bankrupt due to deteriorating financial health over the past year. How should this be treated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Adjust the financial statements by writing down the receivable.
Explanation
This is an adjusting event because the bankruptcy provides additional evidence of a condition (poor collectability of the debt) that already existed at the end of the reporting period.
More IAS 10, IAS 37 & IFRIC 1 MCQs
- Q10An entity is facing a lawsuit. The entity's legal counsel advises that the probability of losing the case and paying damages is 'possible'…
- Q11How frequently should an entity review its recognized provisions according to IAS 37?
- Q12After the reporting period but before the financial statements are authorized for issue, management decides to completely liquidate the…
- Q13Which of the following describes the key characteristic of an 'obligating event' under IAS 37?
- Q14Which of the following is a classic example of a non-adjusting event after the reporting period?