ACCA Strategic Business Reporting (SBR) Practice Exam

What defines an adjusting event under IAS 10?

1. An event that arises after the financial statements are authorized for issue

2. An event providing evidence of conditions existing at the end of the reporting period

3. An event that does not require any adjustments to the financial statements

4. An event whose conditions arise outside the control of the company

The correct answer is: An event providing evidence of conditions existing at the end of the reporting period

An adjusting event under IAS 10 is defined as an event that provides evidence of conditions that existed at the end of the reporting period. This follows the principle that financial statements should reflect the most accurate position of the entity's financial affairs as of the reporting date. When an adjusting event occurs, it allows for new information to be recognized, which directly affects the reported figures in the financial statements. It ensures that users of financial statements have a complete and transparent view of the entity's financial situation, based on facts and events that were already in existence before the financial statements were finalized. Understanding this concept is crucial, as it impacts how and when certain adjustments are made before the finalization of financial statements, ensuring compliance with accounting standards and providing relevant financial information to stakeholders.