Events After Reporting Period

Objective:

To prescribe

 When to adjust FS
 Disclosure of DOA
 Disclosure of events ARP
 Requirments if entity is not going concern.
Scope:
 Accounting for events ARP
 Disclosures of events ARP

Defintion:

Are those (favaourable or unfavourable) that OCCUR between the end of reporting perioid and the date when financial
statements are authorised for issue. Such events can be adjusting or non adjusting depending the conditions/circumstances.

Adjusting events:

“Events that provide evidence of conditions that (already) existed at the end of reporting date.”

‫ایسے واقعات جو ان حاالت کے بارے میں ثبوت فراہم کریں جو رپورٹنگ ڈیٹ پر (پہلے سے) موجود ہوں۔‬
‫ہمیں پتا بعد میں چال ہو۔‬،‫ایک ایسا واقعہ جو پہلے ہوچکا ہے‬

Treatment:
 Adjust the amounts recognise in FS to reflect the adjusting events.
 Update the relevant disclosures in the light of new informtion.

List of Adjusting Events:

1. Discovery of fraud/error after reporting period

2. Asset impairment after reporting period
3. Cost of asset purchased before the year end but paid after the year end
4. Proceeds of asset disposed off before the year end but received after the year end
5. Payment of profit sharing or bonus payment when there is present obligatin at the year end
6. Settelment of a court case
7. Sale of inventory after reporting period that requires adjustment in NRV

8. IAS-10 specifically mentions that

if a customer's bankruptcy is announced after the reporting period,
and there is no indication that
the bankruptcy was solely due to events after the reporting period
it is considered an adjusting event.
 Non-adjusting events:
Events that are indicative (provide hints) of conditions that arsoe after the end reporting period.
Treatment:
 Do not adjust the amounts recognise in FS.
 Diclose (Nature and Financail Effect) if the event is material.

List of Non-adjusting events:

1. Annoucing a plan to discontinue an operaion

2. Annoucing, commencing and implementation of major re-structuring
3. Change in exchange rate after reporting period
4. Change in tax rates/; laws after reporitng period
5. Decline in the fair value of investment after reporting period
6. Dividend declared after reporting period
7. Disposal of major subsidary
8. Disposal of asset after reporting period
9. Destruction of plant due to flood or fire
10. Litigation arising out of events after reporting period
11. Major business combination
12. Major ordinary and potential share transaction after reporting period
13. Purchase of asset after reporting period
14. Significant commitments after reporting period

Disclosure requirment of Non-adjusting events:

An entity shall disclose the following for each material category of non-adjusting event after the reporting period:
 The nature of the event; and
 An estimate of its financial effect
 or a statement that such an estimate can not be made

Date of Autorisation:
Definiton:
It refers to the date when the financial statements are approved by an entity's board of directors or equivalent body for release
to stakeholders.
Approving FS for release can change based on;
 The management structure,
 Statutory requirements
 Procedures followed in preparing and finalising the financial statements.
Diclosure:
An entity shall disclose;
 The date when the financial statements were authorised for issue
 Who gave that authorisation

Importance of date of authorisation:

The financial statements do not reflect events after this date.

Section 232 of Company’s Act, 2017:

 Approved by the board of the company

 Signed on behalf of the board by CEO and at least one director of the company.
In case of a listed company also sigend by CFO.
 Going Concern:

Refers to the assumption that the entity will continue its operations for the foreseeable future.

Explanation:
It means a business is expected to:

 Meet its financial obligations when due.

 Operate for at least the next 12 months
 Not liquidate or go bankrupt in the near future
Indication of Going Concern Issue:
 Deterioration in operating results
 Deterioration in Financial position.

When Going Concern assumption is not appropriate:
An entity shall not prepare its financial statements on a going concern basis if management determines after the reporting
period either:
 That it intends to liquidate the entity
 That it intends to cease trading
 That it has no realistic alternative but to do so. (License is cancelled/Heavy losses)

In that case, financial statements are prepared on alternative basis.

o Assests are measured at realizable value.
o Liabilities are measured at settelment value.

Factors that lead to Going Concern Problem:

 1.Difficulty of major customer
 2.Shortage of important supplies
 3.Cruicial non current asset falling out of use
 4.Emergence of highly effective competitor
 5.Decline in value of investment due to change in market conditons
 6.Decline in NRV of line of inventory below its cost

Note:

When the Going Concern Problem arises,

financial statements ar ADJUSTED.

Even the going concern issue arises after

the reporitng peirod.