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) took place before year-end.
B) did not take place until after 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 because they were not known or existed at the balance sheet date. Therefore, only option B is correct. Options A, C, and D are not correct because conditions that existed before year-end or both before and after year-end may require adjustment or disclosure in the financial statements, and reimbursable insurance claims are also relevant to the valuation of the financial statements.

Whenever Subsequent Events Are Used to Evaluate the Amounts Included