Whenever subsequent events are used to evaluate the amounts included in the statements,care must be taken to distinguish between conditions that existed at the balance sheet date and those that came into being after the end of the year.The subsequent information should not be incorporated directly into the statements if the conditions causing the change in valuation
A)did not take place until after year-end.
B)took place before year-end.
C)occurred both before and after year-end.
D)are reimbursable through insurance policies.

Question

Quizplus · Accepted Answer

Subsequent events that occur after the year-end should not be incorporated directly into the financial statements. Therefore, the conditions causing the change in valuation should have taken place before the year-end to be considered for evaluation in the financial statements. If they occurred after the year-end, they should be disclosed in the notes to the financial statements. Option B is incorrect because if the conditions occurred before year-end, they should be evaluated in the financial statements. Option C is incorrect as it is unclear if the conditions caused by the event occurred before or after the year-end. Option D is irrelevant as it does not relate to the evaluation of subsequent events in financial statements.

Whenever Subsequent Events Are Used to Evaluate the Amounts Included