Explain the treatment of events after the reporting period and classify them as adjusting or non-adjusting.

• A. Adjusting events relate to conditions after the reporting date and are disclosed.
• B. Non-adjusting events provide evidence about conditions existing at the reporting date and require adjustments.
• C. Adjusting events provide evidence about conditions existing at the reporting date and require adjustments; non-adjusting relate to conditions after the reporting date and are disclosed.
• D. All events after the reporting date are treated the same.

Answer: (C)

After the reporting date, events are divided into two groups to decide how they affect the financial statements. Adjusting events are those that provide evidence about conditions that existed at the end of the reporting period, so the amounts in the financial statements must be adjusted accordingly. Non-adjusting events arise from conditions that developed after the reporting date, so they do not change the recorded amounts, but if they are material, the nature of the event and its financial effect (where possible) should be disclosed.

So, adjusting events require changes to the numbers and sometimes notes; non-adjusting events are disclosed in the notes rather than adjusted in the figures. This distinction is why the statement that adjusting events provide evidence about conditions at the reporting date and require adjustments, while non-adjusting events relate to conditions after the date and are disclosed, is the correct description.