IAS 10 ‘Events After The Reporting Period‘ STATES when events after the end of the reporting period should be adjusted in the financial statements.
‘Adjusting Events‘ are those providing evidence of conditions existing at the end of the reporting period, WHEREAS ‘Non-Adjusting Events‘ are indicative of conditions arising after the reporting period.
Table of Contents
IAS 10 – Events After the Reporting Period
Favorable or unfavorable event that OCCURS between the reporting date and the date that the financial statements are authorized for issue.
1. Adjusting Events
An event AFTER the reporting date that provides further evidence of conditions that existed at the reporting date.
| Examples |
|---|
| Events that indicate that the going concern assumption in relation to the whole or part of the entity is not appropriate. |
| Settlement of litigation after reporting date in respect of events that occurred before the end of the reporting period. |
| Bankruptcy of a customer that occurs after reporting date that confirms a loss existed at the reporting date on trade receivables. |
| Sales of inventories after reporting date that gives evidence about their net realizable value (NRV) at the reporting date. |
| Determination after reporting date of cost of assets purchased or proceeds from assets sold before reporting date. |
| Detection of fraud or errors after the reporting period may indicate that the financial statements are misstated. |
An entity shall ADJUST the amounts recognized in its financial statements to reflect ‘Adjusting Events‘ after the reporting period.]
1.1 Going Concern (Exception)
An entity shall NOT prepare its financial statements on a going concern if events after the reporting period indicate that the entity shall NOT be able to continue as a going concern irrespective of whether such events are indicative of conditions that arose after the end of reporting period or not.
2. Non-Adjusting Events
An event AFTER the reporting period that is indicative of a condition that arose after the reporting date.
| Examples |
|---|
| Declaration of Dividends after the reporting date does not indicate the existence of liability to pay dividends at the reporting date. |
| Major business combination of entities or disposal of a subsidiary. |
| Major purchase or disposal of assets, classification of assets as held for sale or expropriation of major assets by government. |
| Destruction of assets of the entity by floods occurring after the reporting period. |
| Management’s plan to discontinue or significantly curtail its activities in major geographic segments. |
| Announcing a major restructuring after reporting date. |
| Major share transactions. |
| Abnormal large changes after the reporting period in assets prices or foreign exchange rates. |
| Changes in tax rates or tax laws. |
| Entering into significant commitments or contingent liabilities such as guarantees. |
| Initiation of major litigation arising solely out of events that occurred after the reporting period. |
An entity shall NOT ADJUST the amounts recognized in its ‘Financial Statements’ to reflect ‘Non-Adjusting Events‘ after the reporting period.
However, DISCLOSE the following for each ‘Material’ category of the non-adjusting event after the reporting period:
- The nature of the event; AND
- An estimate of its financial effect or the statement that such estimate cannot be made.
IAS 10 – Additional Disclosures
| Date of authorization of issue of ‘Financial Statements’. |
| If the entity’s owners or others have the power to amend the ‘Financial Statements’ after issue, the entity is required to DISCLOSE that fact. |
| For any information received about conditions that existed at the reporting date, disclosure that relate to those conditions should be updated with the new information. |
Synopsis
IAS 10 was REISSUED in December 2003 and applies to annual periods beginning on or after 1 January 2005. It STATES when events after the end of the reporting period should be adjusted in the ‘Financial Statements‘.
Chartered Accountant – ICAP
Bachelor of Accounting (Honours) – AeU, Malaysia