ACCA Strategic Business Reporting (SBR) Practice Exam

What are the consequences of non-adjusting events according to IAS 10?

1. They must be recognized in the financial statements

2. They can be disclosed in the notes if they are material

3. They require a prior year adjustments

4. They cannot be disclosed under any circumstances

The correct answer is: They can be disclosed in the notes if they are material

In the context of IAS 10, non-adjusting events are those significant events that occur after the reporting period but before the financial statements are approved for issue. These events do not require adjustments to the financial statements since they do not provide evidence of conditions that existed at the end of the reporting period. The correct answer, which indicates that non-adjusting events can be disclosed in the notes if they are material, highlights an essential aspect of financial reporting. While these events do not modify the figures presented in the financial statements, they can provide useful information for the users of the financial statements regarding the potential future implications for the entity. Thus, if such events are considered material—meaning they could influence the economic decisions of the users—they should be disclosed adequately in the notes to the financial statements. This approach aligns with the principle of transparency, allowing stakeholders to understand significant post-reporting period developments. It ensures that the financial statements provide a complete picture of the entity's position and responsibilities even beyond the reporting date, reflecting events that could impact its future performance.