Exam Problem 2018 Fall #10
I know that part c.) doesn't ask about this particular detail, but on the off chance that this question was rephrased to ask, "If these items were considered material, what type of subsequent of event would each of these items be classified as and describe the reasoning?". Out of curiosity, how would any of you answer this question?
Comments
That's an interesting question. They are definitely referring to subsequent events even though they didn't use that term.
This is great! Thank you graham!
In the examiners report it states that a common mistake is: "Stating that the events are Type 2 subsequent events and therefore would not be reflected in the financial statements (both events are Type 1 subsequent events). "
How would this change your logic on c.i. (agents' balances) as you noted that it was Type 2?
I believe the examiner's report is wrong about (i). Using the reasoning in my previous post from Oct 2020, I believe (i) is a Type 2 event.
If (i) were a Type 1 event, then it would have to be reflected in the financial statements (assuming it was material) but the examiner's report (correctly) states that it should not be reflected.
I will add a footnote to the BattleTable in the wiki with a link to this thread.
Thanks!
As stated in paragraph 6 of the SSAP 9 source text, material Type I events shall be reflected in the prior year's financial statement.
Regarding 2018.F.10.c.i (agents' balances), the source text and examiner's sample answer seem to be in agreement.