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 come 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 balance sheet date should not be incorporated directly into the financial statements unless they relate to conditions that existed at the balance sheet date. If the conditions causing the change in valuation did not take place until after year-end, this subsequent information should not be incorporated directly into the statements.

Whenever Subsequent Events Are Used to Evaluate the Amounts Included