When Ken Baez released the audit report of Imperial Corp., he did not anticipate that there would follow an announcement two days later that several days after year-end his client's
Foreign subsidiary had been nationalized by Libya for non-compliance to environmental laws of
The country. What type of subsequent event was this?
A) Type 1
B) Type 2
C) Type 1 and 2
D) this was not a subsequent event

Question

Quizplus · Accepted Answer

This is a Type 2 subsequent event because it occurred after the balance sheet date but before the issuance of the financial statements. The nationalization of the foreign subsidiary would have a material impact on the financial statements and therefore should be disclosed in the notes to the financial statements.

When Ken Baez Released the Audit Report of Imperial Corp