The financial position of an enterprise as revealed by its financial statement may be seriously affected by events occurring after the balance sheet date and contingencies. For this reason FRS 21 Events after the Balance Sheet Date and FRS12 provisions, Contingent Liabilities and Contingent Assets lay down rules to ensure that such events and contingencies are properly reflected in financial statements.Required:What factors determine whether events after the balance sheet date require adjustment to the financial statements, according to FRS 21 Events after Balance Sheet Date? Explain the different accounting treatments required for contingent liabilities and contingent assets depending on their degree of probability. 3. Up to what date would it normally be necessary to adjust for or disclose events after the balance sheet date or to disclose contingent liabilities and contingent assets?

1. Adjusting events are those events which require adjustment in the amount recorded in financial…

Answered: What factors determine whether events…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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The financial position of an enterprise as revealed by its financial statement may be seriously affected by events occurring after the balance sheet date and contingencies. For this reason FRS 21 Events after the Balance Sheet Date and FRS12 provisions, Contingent Liabilities and Contingent Assets lay down rules to ensure that such events and contingencies are properly reflected in financial statements.

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What factors determine whether events after the balance sheet date require adjustment to the financial statements, according to FRS 21 Events after Balance Sheet Date?
Explain the different accounting treatments required for contingent liabilities and contingent assets depending on their degree of probability.

3. Up to what date would it normally be necessary to adjust for or disclose events after the balance sheet date or to disclose contingent liabilities and contingent assets?

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

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