In 20X8, Germany raised its taxes to meet increasing government deficits. The new tax rate took effect on May 28, just days before Strassbourg Mills' year end. This is an adjusting event for Strassbourg Mills.

Question

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An adjusting event is one that provides evidence of conditions that existed at the balance sheet date. Since the tax rate change provides evidence of conditions (government deficits and tax policy) that existed before the year-end, it would require Strassbourg Mills to adjust its financial statements to reflect the new tax obligations.

In 20X8, Germany Raised Its Taxes to Meet Increasing Government