CAF-8 · Chapter 15 · Question 1 of 10
A major customer of the client declares bankruptcy on 15 August, providing evidence that they were insolvent at the client's balance sheet date of 30 June. Under IAS 10 and ISA 560, what type of event is this?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) An adjusting event requiring the receivable balance to be written down.
Explanation
Adjusting events provide evidence of conditions that already existed at the end of the reporting period. The customer's bankruptcy confirms the debt was bad at year-end, meaning the financial statements must be adjusted to record a bad debt expense.
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