Adjusting Events:
Noun (plural: adjusting events)
1. In accounting, events that occur after the end of a reporting period but before the financial statements are authorised for issue. These events require adjustments to the financial statements to ensure their accuracy and relevance.
2. Adjusting events are typically significant events that provide additional information about the financial position, performance, or cash flows of an entity. They may include events such as the settlement of a lawsuit, the sale or purchase of a major asset, or the occurrence of a natural disaster.
3. The purpose of adjusting events is to ensure that the financial statements reflect the most up-to-date and accurate information available. By making necessary adjustments, the financial statements provide users with a true and fair view of the entity’s financial position and performance.
4. Adjusting events are distinguished from non-adjusting events, which are events that occur after the reporting period and do not require adjustments to the financial statements. Non-adjusting events may still be disclosed in the financial statements if they are considered material and relevant to the understanding of the entity’s financial position.
5. Adjusting events are an important concept in financial reporting and are governed by accounting standards and principles, such as the International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP). These standards provide guidance on when and how to recognise and adjust for adjusting events in the financial statements.
Adjusting events, also known as adjusting events after the reporting period, refer to events that occur after the end of the reporting period but before the financial statements are authorised for issue. These events may require adjustments to the financial statements to ensure they present a true and fair view of the entity’s financial position and performance.
According to accounting standards, adjusting events are those that provide evidence of conditions that existed at the end of the reporting period. They include events that provide additional information about conditions that arose after the reporting period but were already present at that time. Adjusting events also include events that indicate that the going concern assumption is no longer appropriate.
Examples of adjusting events may include the settlement of a lawsuit that was pending at the end of the reporting period, the determination of the amount of a loss on an uncollectible receivable, or the discovery of fraud or errors that require adjustments to the financial statements.
When an adjusting event occurs, the entity is required to adjust the amounts recognised in its financial statements or provide additional disclosures to reflect the impact of the event. Adjustments are made to ensure that the financial statements are accurate and reliable for users.
It is important for entities to identify and evaluate adjusting events after the reporting period to ensure compliance with accounting standards and to provide relevant and reliable financial information to users. Failure to properly account for adjusting events may result in misstated financial statements and potential legal and regulatory consequences.
Q: What are adjusting events?
A: Adjusting events are events that occur after the end of an accounting period but before the financial statements are prepared. These events require adjustments to be made to the financial statements to ensure they reflect the most accurate and up-to-date information.
Q: Why are adjusting events necessary?
A: Adjusting events are necessary to ensure that the financial statements provide a true and fair view of the company’s financial position and performance. They help to match revenues and expenses to the appropriate accounting period and ensure that all relevant information is included in the financial statements.
Q: What are examples of adjusting events?
A: Examples of adjusting events include the discovery of errors or omissions in the accounting records, changes in estimates of amounts previously recognized, the settlement of litigation or disputes, and the receipt of information about conditions that existed at the end of the accounting period.
Q: How are adjusting events recorded?
A: Adjusting events are recorded by making adjusting journal entries. These entries are made to update the accounts and reflect the impact of the event on the financial statements. The adjustments may involve recognizing additional revenues or expenses, adjusting the carrying value of assets or liabilities, or making changes to the provision for doubtful debts or inventory valuation.
Q: When should adjusting events be recognized?
A: Adjusting events should be recognized in the financial statements of the period to which they relate. If an adjusting event provides evidence of conditions that existed at the end of the accounting period, it should be recognized in that period’s financial statements, even if the event occurs after the end of the period.
Q: What is the significance of adjusting events for financial statement users?
A: Adjusting events are significant for financial statement users as they provide more accurate and reliable information about a company’s financial position and performance. By adjusting the financial statements for events that occurred after the end of the accounting period, users can make better-informed decisions based on the most up-to-date information.
Q: Can adjusting events have a material impact on the financial statements?
A: Yes, adjusting events can have a material impact on the financial statements. Depending on the nature and magnitude of the event, it may result in significant changes to the reported figures, such as revenues, expenses, assets, or liabilities. It is important for companies to carefully assess the impact of adjusting events and make appropriate adjustments to ensure the financial statements are accurate.
Q: Are adjusting events disclosed in the financial statements?
A: Adjusting events are not typically
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 11th April 2024.
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
- Page URL:https://dlssolicitors.com/define/adjusting-events/
- Modern Language Association (MLA):Adjusting Events. dlssolicitors.com. DLS Solicitors. May 09 2024 https://dlssolicitors.com/define/adjusting-events/.
- Chicago Manual of Style (CMS):Adjusting Events. dlssolicitors.com. DLS Solicitors. https://dlssolicitors.com/define/adjusting-events/ (accessed: May 09 2024).
- American Psychological Association (APA):Adjusting Events. dlssolicitors.com. Retrieved May 09 2024, from dlssolicitors.com website: https://dlssolicitors.com/define/adjusting-events/
Our team of professionals are based in Alderley Edge, Cheshire. We offer clear, specialist legal advice in all matters relating to Family Law, Wills, Trusts, Probate, Lasting Power of Attorney and Court of Protection.
All author posts