SESSION 29 – IAS 10 EVENTS AFTER THE REPORTING PERIOD

OVERVIEW
Objective

¾ To define events after the reporting period.

¾ To describe the treatment of events after the reporting period.

¾ Objective
INTRODUCTION ¾ Scope
¾ Definitions

RECOGNITION ¾ Adjusting events

AND ¾ Non adjusting events
MEASUREMENT ¾ Dividends
¾ Going Concern

DISCLOSURE

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SESSION 29 – IAS 10 EVENTS AFTER THE REPORTING PERIOD

1 INTRODUCTION
1.1 Objective

¾ The objective of IAS 10 is to describe:

‰ when an entity should adjust its financial statements for events after the reporting
period, and
‰ the disclosures an entity should give about the date when the financial statements
were authorised for issue and about events after the end of the reporting period.

1.2 Scope

¾ IAS 10 should be applied in the accounting for, and disclosure of, events after the
reporting period.

1.3 Definitions

¾ Events after the reporting period are those events, both favourable and
unfavourable, that occur between the end of the reporting period and the
date on which the financial statements are authorised for issue. Two types
of events can be identified:
‰ those that provide further evidence of conditions that existed at the
end of the reporting period (adjusting events after the end of the
reporting period), and
‰ those that are indicative of conditions that arose after the end of the
reporting period (non-adjusting events after the end of the reporting
period).

2 RECOGNITION AND MEASUREMENT

2.1 Adjusting events

¾ An entity should adjust its financial statements for adjusting events after the end of the
reporting period.

¾ Examples of adjusting events are:

‰ the resolution after the end of the reporting period of a court case which, because it
confirms that an entity already had a present obligation at the end of the reporting
period, requires the entity to recognise a provision instead of merely disclosing a
contingent liability or adjusting the provision already recognised,
‰ the bankruptcy of a customer which occurs after the end of the reporting period
and which confirms that a loss already existed at the end of the reporting period on
a trade receivable account,
‰ the discovery of fraud or error that show that the financial statements were
incorrect, and
‰ the sale of inventories after the year end at an amount below their cost.

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 SESSION 29 – IAS 10 EVENTS AFTER THE REPORTING PERIOD

2.2 Non adjusting events

¾ An entity should not adjust its financial statements for non-adjusting events after the
end of the reporting period.

¾ The following are examples of non-adjusting events that may be of such importance that
non-disclosure would affect the ability of the users of the financial statements to make
proper evaluations and decisions:

‰ a major business combination after the end of the reporting period,

‰ the destruction of a major production plant by a fire after the end of the reporting
period,

‰ abnormally large changes after the end of the reporting period in asset prices or
foreign exchange rates, and

‰ a decline in market value of investments between the end of the reporting period
and the date on which the financial statements are authorised for issue.

Commentary

The fall in market value does not normally relate to the condition of the investments at
the end of the reporting period, but reflects circumstances, which have arisen in the
following period. Therefore, an entity does not adjust the amounts recognised in its
financial statements for that investment.

2.3 Dividends

¾ If dividends are proposed or declared after the end of the reporting period, an entity
should not recognise those dividends as a liability. This is a change from previous
practice.

¾ IAS 1 requires an entity to disclose the amount of dividends that were proposed or
declared after the end of the reporting period but before the financial statements were
authorised for issue. This disclosure must be made in the notes to the accounts, not on
the face of the statement of financial position.

2.4 Going Concern

¾ An entity should not prepare its financial statements on a going concern basis if
management determines after the end of the reporting period that:

‰ it intends to liquidate the entity or to cease trading, or

‰ it has no realistic alternative but to do so.

¾ Deterioration in operating results and financial position after the end of the reporting
period may indicate a need to consider whether the going concern assumption is still
appropriate.

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SESSION 29 – IAS 10 EVENTS AFTER THE REPORTING PERIOD

¾ If the going concern assumption is no longer appropriate the IAS requires a

fundamental change in the basis of accounting, rather than an adjustment to the
amounts recognised within the original basis of accounting.

3 DISCLOSURE
¾ An entity should disclose the date when the financial statements were authorised for
issue and the name of the governing body that gives that authorisation.

¾ If the entity’s owners or others have the power to amend the financial statements after
issuance, the entity should disclose that fact.

Commentary

It is important for users to know when the financial statements were authorised for
issue, as the financial statements do not reflect events after this date.

¾ An entity should disclose the following in respect of non-adjusting events that are of
such importance that non-disclosure would affect the ability of the users of the financial
statements to make proper evaluations and decisions.

‰ the nature of the event, and

‰ an estimate of its financial effect, or a statement that such an estimate cannot be

made.

¾ The following disclosures are required by IAS 1 if the accounts are not prepared on the
basis of the going concern assumption:

‰ A note saying that the financial statements are not prepared on a going concern
basis, or

‰ management is aware of material uncertainties related to events or conditions,

which may cast significant doubt upon the entity’s ability to continue as a going
concern.

FOCUS
You should now be able to:

¾ define an event after the end of the reporting period;

¾ account for and disclose events after the end of the reporting period in accordance with
IAS 10;

¾ record the entries for dividends paid and proposed in the financial statements;

¾ discuss the problem of accounting for events after the end of the reporting period,
including reclassification, window dressing etc.

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