If an entity receives information after end of reporting period that one of its assets was impaired at end of reporting period by a material amount it must:
A) adjust the amounts recognised in the financial statements to reflect the impairment;
B) notify all shareholders in writing;
C) disclose the impairment in the notes but not recognise the amount in the financial statements;
D) include the impairment loss as a contingent liability.

Question

Quizplus · Accepted Answer

According to the accounting principle of Prudence, if an asset is impaired, the entity must adjust the amounts recognized in the financial statements to reflect the impairment. This means that the carrying amount of the asset on the balance sheet must be reduced to reflect the impairment loss. Therefore, choice A is the best option among the given choices.

If an Entity Receives Information After End of Reporting Period