Economics · Accounting Events
Following the financial year-end, an employee had a serious accident at work and immediately initiated a legal case against Zed Co. The legal expert confirmed that a material settlement is likely within 12 months. How should this event be treated in the financial statements?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1It is a non-adjusting event that occurred after the year-end and can be completely ignored.
- 2It is a non-adjusting event, but it must be disclosed in the notes to the financial statements.✓
- 3It is an adjusting event, so the figures remain unchanged but notes must be adjusted.
- 4It is an adjusting event, so the full estimated settlement must be provided for under current liabilities.
Correct answer
It is a non-adjusting event, but it must be disclosed in the notes to the financial statements.
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