Which statement is TRUE regarding events after the reporting period that might affect financial statements?

The statement regarding events after the reporting period that must be disclosed in the financial statements is true because these events can have a profound impact on the financial position and performance of a company. Events occurring after the reporting period may provide new information about conditions that existed at the reporting date or may relate to conditions that arose after that date but before the financial statements are issued.

When significant events are identified, they may influence the decisions of users of the financial statements; hence, transparency is paramount. Recognizing these events, therefore, helps ensure that stakeholders have access to the most relevant and up-to-date information. Disclosure is essential for clarity and completeness in financial reporting, allowing users to make informed judgments about the company’s ongoing financial health and risks.

Other options reflect misunderstandings of the reporting standards regarding post-reporting period events: disregarding them entirely or only documenting those deemed significant could lead to incomplete or misleading financial statements. In reality, both adjusting events and non-adjusting events require careful consideration, with the need for disclosure being a central aspect of compliance with relevant accounting standards.