Topic 7: IAS 10

• Events after the reporting period


  Events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue
• Types of events after the reporting period

  • Those that provide evidence of conditions that existed at the end of the reporting period (adjusting events)
  • Those that are indicative of conditions that arose after the reporting period (non-adjusting events)
• Authorisation for issue of financial statements


  The process involved in authorising the financial statements for issue will vary depending upon the management structure, statutory requirements and procedures followed in preparing and finalising the financial statements
• Authorisation for issue of financial statements


  • Management completes draft financial statements, board of directors reviews and authorises them for issue, then financial statements are made available to shareholders who approve them at annual meeting
  • Management authorises financial statements for issue to supervisory board made up of non-executives, who then approve the financial statements
• Events after the reporting period include all events up to the date when the financial statements are authorised for issue, even if those events occur after the public announcement of profit or of other selected financial information
• Adjusting events after the reporting period

  1. Entity shall adjust the amounts recognised in its financial statements to reflect adjusting events

  2. Examples: settlement of court case, receipt of information about asset impairment, determination of asset costs/proceeds, determination of profit-sharing/bonus payments, discovery of fraud or errors
• Non-adjusting events after the reporting period

  1. Entity shall not adjust the amounts recognised in its financial statements to reflect non-adjusting events

  2. Example: decline in fair value of investments between end of reporting period and authorisation date
• Dividends


  If an entity declares dividends to holders of equity instruments after the reporting period, it shall not recognise those dividends as a liability at the end of the reporting period
• The entity shall not prepare its financial statements on a going concern basis if events after the reporting period indicate that the going concern assumption is not appropriate
• An entity shall not adjust the amounts recognised in its financial statements to reflect non-adjusting events after the reporting period
• The decline in fair value does not normally relate to the condition of the investments at the end of the reporting period, but reflects circumstances that have arisen subsequently
• An entity does not adjust the amounts recognised in its financial statements for the investments
• An entity does not update the amounts disclosed for the investments as at the end of the reporting period, although it may need to give additional disclosure
• If an entity declares dividends to holders of equity instruments after the reporting period, the entity shall not recognise those dividends as a liability at the end of the reporting period
• If dividends are declared after the reporting period but before the financial statements are authorised for issue, the dividends are not recognised as a liability at the end of the reporting period because no obligation exists at that time
• Such dividends are disclosed in the notes in accordance with IAS 1 Presentation of Financial Statements
• 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 or to cease trading, or that it has no realistic alternative but to do so
• Deterioration in operating results and financial position after the reporting period may indicate a need to consider whether the going concern assumption is still appropriate
• If the going concern assumption is no longer appropriate, the effect is so pervasive that this Standard requires a fundamental change in the basis of accounting, rather than an adjustment to the amounts recognised within the original basis of accounting
• IAS 1 specifies required disclosures if the financial statements are not prepared on a going concern basis or if management is aware of material uncertainties related to events or conditions that may cast significant doubt upon the entity's ability to continue as a going concern
• An entity shall disclose the date when the financial statements were authorised for issue and who gave that authorisation
• If the entity's owners or others have the power to amend the financial statements after issue, the entity shall disclose that fact
• If an entity receives information after the reporting period about conditions that existed at the end of the reporting period, it shall update disclosures that relate to those conditions, in the light of the new information
• An entity updates its disclosures about a contingent liability in the light of evidence that becomes available after the reporting period about a contingent liability that existed at the end of the reporting period
• Examples of non-adjusting events after the reporting period that would generally result in disclosure

  • Major business combination
  • Announcing a plan to discontinue an operation
  • Major purchases of assets, classification of assets as held for sale, other disposals of assets, or expropriation of major assets by government
  • The destruction of a major production plant by a fire
  • Announcing, or commencing the implementation of, a major restructuring
  • Major ordinary share transactions and potential ordinary share transactions
  • Abnormally large changes in asset prices or foreign exchange rates
  • Changes in tax rates or tax laws enacted or announced after the reporting period that have a significant effect
  • Entering into significant commitments or contingent liabilities
  • Commencing major litigation arising solely out of events that occurred after the reporting period
• An entity shall apply this Standard for annual periods beginning on or after 1 January 2005