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Case Study: Accounting for Subsequent Events Background: Scenario: Subsequent Event 1: Subsequent Event 2: Subsequent Event 3: Accounting Considerations: XYZ Corporation, a publicly traded company, operates in the technology sector. The fiscal year-end is December 31. The financial statements are typically issued in March following the year-end. As of December 31, Year 1, XYZ Corporation is finalizing its financial statements. However, subsequent events occur after the year-end that may impact the financial statements. The key events are as follows: In January Year 2, XYZ Corporation experiences a significant decline in the market value of its inventory due to unforeseen technological changes. The decline affects the carrying amount of the inventory as of December 31, Year 1. In February Year 2, XYZ Corporation's major supplier declares bankruptcy. This bankruptcy jeopardizes the continuity of the supply chain and may result in the impairment of certain assets recorded on the balance sheet as of December 31, Year 1. In March Year 2, the government announces a new tax regulation impacting XYZ Corporation's future tax liabilities. The regulation is enacted after December 31, Year 1, but its effects must be considered in the financial statements. The accounting team must evaluate how to incorporate these subsequent events into the financial statements for the year ended December 31, Year 1. They need to determine the appropriate recognition, measurement, and disclosure for each event. Objective Type Question: Question: Considering the subsequent events in the case study, which accounting principle or standard guides the recognition, measurement, and disclosure of events that occur after the financial statement date but before the issuance of the financial statements? a) Matching Principle b) Consistency Prin ple c) Materiality Principle d) Subsequent Events Principle

Case Study: Accounting for Subsequent Events Background: Scenario: Subsequent Event 1: Subsequent Event 2: Subsequent Event 3: Accounting Considerations: XYZ Corporation, a publicly traded company, operates in the technology sector. The fiscal year-end is December 31. The financial statements are typically issued in March following the year-end. As of December 31, Year 1, XYZ Corporation is finalizing its financial statements. However, subsequent events occur after the year-end that may impact the financial statements. The key events are as follows: In January Year 2, XYZ Corporation experiences a significant decline in the market value of its inventory due to unforeseen technological changes. The decline affects the carrying amount of the inventory as of December 31, Year 1. In February Year 2, XYZ Corporation's major supplier declares bankruptcy. This bankruptcy jeopardizes the continuity of the supply chain and may result in the impairment of certain assets recorded on the balance sheet as of December 31, Year 1. In March Year 2, the government announces a new tax regulation impacting XYZ Corporation's future tax liabilities. The regulation is enacted after December 31, Year 1, but its effects must be considered in the financial statements. The accounting team must evaluate how to incorporate these subsequent events into the financial statements for the year ended December 31, Year 1. They need to determine the appropriate recognition, measurement, and disclosure for each event. Objective Type Question: Question: Considering the subsequent events in the case study, which accounting principle or standard guides the recognition, measurement, and disclosure of events that occur after the financial statement date but before the issuance of the financial statements? a) Matching Principle b) Consistency Prin ple c) Materiality Principle d) Subsequent Events Principle

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Case Study: Accounting for Subsequent Events Background: Scenario: Subsequent Event 1: Subsequent Event 2: Subsequent Event 3: Accounting Considerations: XYZ Corporation, a publicly traded company, operates in the technology sector. The fiscal year-end is December 31. The financial statements are typically issued in March following the year-end. As of December 31, Year 1, XYZ Corporation is finalizing its financial statements. However, subsequent events occur after the year-end that may impact the financial statements. The key events are as follows: In January Year 2, XYZ Corporation experiences a significant decline in the market value of its inventory due to unforeseen technological changes. The decline affects the carrying amount of the inventory as of December 31, Year 1. In February Year 2, XYZ Corporation's major supplier declares bankruptcy. This bankruptcy jeopardizes the continuity of the supply chain and may result in the impairment of certain assets recorded on the balance sheet as of December 31, Year 1. In March Year 2, the government announces a new tax regulation impacting XYZ Corporation's future tax liabilities. The regulation is enacted after December 31, Year 1, but its effects must be considered in the financial statements. The accounting team must evaluate how to incorporate these subsequent events into the financial statements for the year ended December 31, Year 1. They need to determine the appropriate recognition, measurement, and disclosure for each event. Objective Type Question: Question: Considering the subsequent events in the case study, which accounting principle or standard guides the recognition, measurement, and disclosure of events that occur after the financial statement date but before the issuance of the financial statements? a) Matching Principle b) Consistency Prin ple c) Materiality Principle d) Subsequent Events Principle
Transcribed Image Text:Case Study: Accounting for Subsequent Events Background: Scenario: Subsequent Event 1: Subsequent Event 2: Subsequent Event 3: Accounting Considerations: XYZ Corporation, a publicly traded company, operates in the technology sector. The fiscal year-end is December 31. The financial statements are typically issued in March following the year-end. As of December 31, Year 1, XYZ Corporation is finalizing its financial statements. However, subsequent events occur after the year-end that may impact the financial statements. The key events are as follows: In January Year 2, XYZ Corporation experiences a significant decline in the market value of its inventory due to unforeseen technological changes. The decline affects the carrying amount of the inventory as of December 31, Year 1. In February Year 2, XYZ Corporation's major supplier declares bankruptcy. This bankruptcy jeopardizes the continuity of the supply chain and may result in the impairment of certain assets recorded on the balance sheet as of December 31, Year 1. In March Year 2, the government announces a new tax regulation impacting XYZ Corporation's future tax liabilities. The regulation is enacted after December 31, Year 1, but its effects must be considered in the financial statements. The accounting team must evaluate how to incorporate these subsequent events into the financial statements for the year ended December 31, Year 1. They need to determine the appropriate recognition, measurement, and disclosure for each event. Objective Type Question: Question: Considering the subsequent events in the case study, which accounting principle or standard guides the recognition, measurement, and disclosure of events that occur after the financial statement date but before the issuance of the financial statements? a) Matching Principle b) Consistency Prin ple c) Materiality Principle d) Subsequent Events Principle
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