CAF-8 · Chapter 15 · Question 2 of 10
On 20 July, a sudden, massive earthquake destroys the client's uninsured main factory. The client's year-end is 30 June. Assuming the company is still a going concern, how should this be treated in the June 30 financial statements?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) It is a non-adjusting event; if material, its nature and financial effect must be disclosed in the notes.
Explanation
A natural disaster after the reporting date is a classic non-adjusting event because the condition (the earthquake) did not exist at June 30. The balance sheet figures remain unchanged, but the massive loss must be disclosed so users are aware.
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