EVENTS AFTER BALANCE DATE Flashcards
What is the maximum amount of time allowed for the authorisation of financial statements?
5 months
What are the two types of events that can be identified?
Adjusting events
Non-adjusting events
What is an adjusting event?
Those that provide evidence of conditions that existed at the end of the reporting period.
SHALL adjust the amounts recognised in FS to reflect adjusting events after the reporting period.
- J/E
- Adjust amounts OR
- Recognise something previously unrecognised.
What is a non-adjusting event?
Those events that are indicative of conditions that arose AFTER the reporting period.
- NO J/E’s
- BUT… Entity must disclose.
Examples of an adjusting event?
a) Court case settled after reporting date
b) Asset impairment
c) Asset purchased/sold
d) Employee benefits
e) Fraud or errors
How would you treat a court case not settled by the end of the reporting period?
Adjusting event.
- Might recognise a contingent liability at reporting date
- If settled within 5 months of the end of reporting period, recognise a provision or even an actual liability.
Asset impairment?
Adjusting event.
Accounts receivable at balance date. Within 5 months of balance date the account goes into liquidation.
Asset purchased or sold?
Adjusting event.
Might adjust inventory for items sold in that 5 month period.
Examples of a non-adjusting event according to NZ IAS 10?
A decline in value of investments
Share values decline
Circumstances that arose after balance date.
Declaration of dividends after the reporting period?
Entity SHALL NOT recognise a liability as at the end of the reporting period.
No obligation exists at the end of reporting period and therefore, no liability can be recognised.
HOWEVER, must be disclosed according to NZ IAS 1.
Preparation of financial statements as a going concern?
An entity shall NOT prepare financial statements on a going concern basis if WITHIN the 5 month period management decides either:
a) that it intends to liquidate or cease trading, OR
b) that it has no realistic alternative but to do so.
If by the deterioration of operating results implies that the going concern assumption is no longer appropriate, a fundamental change in accounting basis must occur.
–> ASSET VALUES NEED TO BE AT LIQUIDATION VALUE.
Any disclosure requirements after authorisation date?
NO. Anything that happens after the date of authorisation must not be included.
What are the requirements for the disclosure of non-adjusting material events occuring after the end of the reporting period?
For each material category of non-adjusting events the entity must disclose:
a) NATURE of the event, AND
b) the estimated financial effect of the event.
List examples of non-adjusting events that would result in disclosure.
a) Major business combination
b) Discontinuing of an operation
c) Major purchase of assets
d) Destruction of a major production plant by e) fire
f) major restructuring
