IAS 10- Events After The Reporting Period

Question 1

Events after the reporting period fall into two categories

Answer 1

• adjusting events

- non adjusting events

Question 2

Adjusting events

Answer 2

• those events which provide evidence of conditions which existed at the end of the reporting period, financial statement must be adjusted

Question 3

Example of adjusting events include

Answer 3

• the settlement of an outstanding court case that was provided for or disclosed as a contingent liability at the year end. Financial statements should be amended to reflect actual settlement amount
• sale of inventories after the year end at a price lower than cost. The inventory value should be adjusted accordingly

Question 4

Non- adjusting events

Answer 4

• those events which are indicative of conditions which arose after the end of the reporting period, the financial statements are not adjusted but the event is disclosed in a note to financial statements

Question 5

Examples of non adjusting events include:

Answer 5

• major purchase or disposal of assets such as PPE
• issues of shared and debentures
• dividends declared after the year end (not adjusting because not an obligation as at the reporting date)
• significant fluctuations in foreign exchange rates that would affect amounts reflected in the financial statements

Question 6

What happens if directors decide to liquidate the company or cease trading before the accounts are published?

Answer 6

• the accounts must not be prepared on a going concern (ie. on bases other than using historic cost principles)