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An entity will issue its December 31, 20X1 financial statements on February 20, 20X2. On...

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Accounting

An entity will issue its December 31, 20X1 financial statements on February 20, 20X2. On January 20, 20X2, an earthquake destroyed one of the entitys manufacturing plants. Does the entity recognize the impact of this event in its December 31, 20X1 financial statements? Why or why not?

  1. No, because conditions regarding the event did not exist as of the balance sheet date

2. No, because events occurring after the balance sheet date are never recognized

3. Yes, because conditions regarding the event existed as of the balance sheet date

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