Ch33: Events After the Reporting Period

Question 1

Define what subsequent events (AKA “events after the reporting period”) mean.

Answer 1

Subsequent events are favorable and unfavorable events that occur between the end of the reporting period and the date when the financial statements are “authorized for the issue”.

Question 2

What does it means when the financial statements are “authorized for issue”?

Answer 2

Authorized for issue refers to the date on which the board of directors approves the financial statements.

Question 3

Identify and explain the two types of subsequent events.

Answer 3

Adjusting events provide evidence of conditions that existed at the end of the reporting period.
Non-adjusting events are indicative of conditions that arose after the reporting period.

Question 4

For non-adjusting subsequent events, they are not recorded under IFRS/ASPE but are required to be disclosed. What are the 2 requirements of disclosure?

Answer 4

a. the nature of the event.
b. an estimate of its financial effect or a statement that such an estimate cannot be made.

Question 5

Explain how a change in the going-concern assumption may also be a subsequent event.

Answer 5

If the entity plans to cease trading or liquidate, or has no alternative but to do so, and this situation becomes apparent in the subsequent event period, then the company should not prepare its financial statements on a going-concern basis. This would require restating the current reporting period’s balance sheet at liquidation value.

Question 6

Regardless of the type of subsequent event, under IFRS, a company must disclose:

Answer 6

a. the date the F/S were authorized.
b. any persons who have the power to amend the F/S after they are issued.

Question 7

What’s the primary difference between IFRS (IAS 10) and ASPE (3820)?

Answer 7

The primary difference is in the definition of the subsequent event period.
a. IFRS - Authorization date of the F/S.
b. ASPE - Competition date of the F/S.