- IAS 10: Events After the Reporting Period
- This standard deals with events that occur between the end of the reporting period, and the date when the financial statements are authorised for issue.
- Adjusting Events
- Events that provide additional evidence relating to conditions existing at the reporting date.
- Such events cast doubt on whether the end of period accounts are correct and hence require adjustment.
- Non-Adjusting Events
- Events concerning conditions which arose after the balance sheet date.
- For ‘Adjusting Events’, adjust the financial statements
- For ‘Non-Adjusting Events’
- If it does not impact the entity’s status as a going-concern, only disclose the material events (i.e. events that would influence the economic decisions of financial statements users)
- If it impacts going-concern, present the financial statements on a break-up basis.
Adjusting Events Examples
- Court case settlement: The settlement after the reporting period of a court case that confirms that the entity had a present obligation at the end of the reporting period. The entity adjusts any previously recognised provision related to this court case in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets or recognises a new provision.
- Impairment of assets: The receipt of information after the reporting period indicating that an asset was impaired at the end of the reporting period, or that the amount of a previously recognised impairment loss for that asset needs to be adjusted. For example:
- the bankruptcy of a customer that occurs after the reporting period usually confirms that a loss existed at the end of the reporting period on a trade receivable and that the entity needs to adjust the carrying amount of the trade receivable (e.g. bad debt provision);
- the sale of inventories after the reporting period may give evidence about their net realisable value at the end of the reporting period (e.g. should be written down).
- Finalization of prices: The determination after the reporting period of the cost of assets purchased, or the proceeds from assets sold, before the end of the reporting period.
- Finalization of employee benefits: The determination after the reporting period of the amount of profit-sharing or bonus payments, if the entity had a present legal or constructive obligation at the end of the reporting period to make such payments as a result of events before that date.
- Discovery of fraud: The discovery of fraud or errors that show that the financial statements are incorrect.
Non-Adjusting Events Examples
- Declaration of dividends
- Destruction of a plant by fire
- Fall in market value of investments
- Business combinations
- Discontinuation of an operation
- Shares issuance
- Changes in tax rates
- New contracts resulting in new liabilities