IAS 10 - Chapter 23 - Events after the Reporting Period

Question 1

What does IAS 10 relate to?

Answer 1

Transactions that occur between the reporting date and the date that the financial statements are approved for issue are subject to accounting rules set out in IAS 10 Events after the Reporting Period.

Question 2

What is the reporting date?

Answer 2

The reporting date is the date to which the financial statements are prepared.

Question 3

Who approves the annual financial statements?

Answer 3

The annual financial statements are approved by the Board of Directors and this date is shown in the directors’ report.

Question 4

What is an adjusting event?

Answer 4

An adjusting event is one that provides further evidence of a situation that existed at the reporting date.

Question 5

Give 3 examples of an adjusting event.

Answer 5

Examples of adjusting events:

1 - The sale of goods at a price below that estimated at the reporting date where the reduction in selling price is not due to events that have occurred after the reporting date that resulted in damage to the items.

2 - The bankruptcy of a customer who owed money to the company at the reporting date.

3 - The settlement of an insurance claim that was in negotiation at the reporting date.

Question 6

What is a non-adjusting event?

Answer 6

The occurrence of a non-adjusting event is completely unrelated to any conditions in existence at the reporting date.

Examples of non-adjusting events include:

• issues of shares
• fire, and
• theft

Question 7

What is the accounting treatment of non-adjusting events?

Answer 7

• As non-adjusting events are independent of conditions in existence at the reporting date, no adjustments is made to the financial statements in relation to these items.
• Disclosure is required in relation to material non-adjusting transactions/events.
• The disclosure to be made is in relation to:
  
  • the nature of the event, and
  • the amount of the transaction.

Question 8

What are the rules concerning dividend accruals?

Answer 8

• Dividends are only accrued for in the financial statements if they are proposed by the board of directors and approved by the shareholders at the AGM before the reporting date.
• Dividends proposed but not approved by shareholders before the reporting date are not accrued for but are still disclosed in the notes to the financial statements as required by IAS 1 Presentation of Financial Statements.

Question 9

What is meant by going concern?

Answer 9

Financial statements are presented on the basis that the entity is a going concern, that is, the entity will continue in operation for the next 12 months.

Question 10

Give 2 facts about disclosure.

Answer 10

The date the financial statement were authorized for issue and who authorized their issue must be disclosed in the financial statements.