Question

    A fire destroyed a warehouse on 15 April, after year-end

    31 March but before statements were authorised. Insurance claim will cover most losses. Should this be adjusted in the 31 March accounts?
    A Adjust as it provides evidence of condition at year-end. Correct Answer Incorrect Answer
    B Do not adjust; disclose as material non-adjusting event. Correct Answer Incorrect Answer
    C Recognise insurance proceeds as receivable in March accounts. Correct Answer Incorrect Answer
    D No disclosure needed since insured. Correct Answer Incorrect Answer
    E Adjust only if material to users’ decisions. Correct Answer Incorrect Answer

    Solution

    Fire occurred after year-end and did not relate to conditions existing at 31 March. Hence it is a non-adjusting event; disclose if material, but no adjustment.

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