Question

A company’s workforce went on strike for an indefinite period commencing on 28 June 2022. The strike was expected to cause severe financial conditions for the company. The financial statements for the year ended 30 June 2022 were expected to be finalised by 3 August 2022. Required: Analyse the above event and classify the event as either an adjusting or a non-adjusting event. Apply relevant accounting standards to justify your classification.

Answer 1

As per IAS 10,an event which could be favourable or unfavourable,that occurs beween the end of the reporting period and the date that the financial statements are authorised for issue.

Adjusting event is an event after the reporting period that provides further evidence of conditions that existed at the end of the reporting period,including an event that indicates that the going concern assumption in relation to the whole or part of the enterprise is not appropriate.

In the given case,Since the event of strike provides further evidence of conditions that existed at the end of the reporting period.Accordingly it is an adjusting event.