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Flowchart of Adjusting and Non-Adjusting Events

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Phạm Duy Đạt
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58 views1 page

Flowchart of Adjusting and Non-Adjusting Events

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Phạm Duy Đạt
Copyright
© © All Rights Reserved
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Events after the Reporting Period

Events occuring between:


“The end of the company’s financial year (such as 30 June 2023)”,
and
“the date when financial statements are authorized for issuance
(such as 19 August, 2023)”

Types Non-
Adjusting
Adjusting
Events
Events

Event that happened after the end of Financial Year (such as on Events that happen subsequent to the end of the financial year,
August 07, 2023), however their root-cause or condition already and there's no condition or indication of these events existing at
existed at year end date (on June 30, 2023) the financial year-end.

Let me make things clearer Let me make things clearer

Picture this: someone slaps a lawsuit on your company for selling faulty products. However, the Imagine this: your company's year came to a close on June 30, 2023, and you're all set to issue your
court's decision was still pending, when your company's financial year ended (June 30, 2023). But financial statements on August 19, 2023. Now, out of nowhere, on August 7, 2023, a fire breaks out in
then the court published its decision on August 07, 2023. Now, even though the court decision your factory and completely wipes out your entire stock. Now, here's the key question: was there any
came after the end of the year, the reason for that decision (sale of the faulty products & sign or condition of a fire existing at the end of the year? I mean, did you know at the year-end date

pending litigation) was already present at the end of the reporting period. So, that's why we (June 30, 2023) that a fire will break out in your factory on August 07, 2023? No, Absolutely not! It just

consider it an adjusting event. happened suddenly. So, my friend, that's what we call a non-adjusting event.

What to do in F/S? What to do in F/S?

Adjust the amounts in the Financial Statements to reflect


Do not adjust, only disclose the matter if material
those events

Some Other Examples

• Debtors being bad debts • Dividend declaration


• Inventory’s value lowered down • Fair value decline
• Impairment Loss • Purchase commitment
• Going Concern assumption not valid • New litigation after year end

Prepared by: Muzammil Hussain Korai www.linkedin.com/in/muzammil-hussain-korai

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