IAS 10 Events after the reporting period

Question 1

What is the purpose of IAS 10 Events after the reporting period

Answer 1

It is to define, to what extent events that occur after the reporting period should be recognised in the financial statements.

IAS 10 Events after the reporting period, defines an event after the end of the reporting period as ‘those events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue’

Question 2

What are the two types of events after the reporting period. Also provide examples

Answer 2

Adjusting events

Those events which provide evidence of conditions that existed at the reporting date

FS should be adjusted to reflect the adjusting event

Examples
* Selling inventory post year for lower than cost price (this is evidence that inventory is incorrectly valued at year end).
* Evidence that a customer has gone into liquidation
* Discovery of fraud or error that existed prior to the year end.
* Completion of a court case entered into before the reporting date
* Completion of an insurance claim relating to an event that occurred prior to year end
* Determination after year end, of the sale or purchase price of assets sold or purchased before year end.

Non adjusting events

Those that are indicative of conditions that arose after the reporting date

FS should not be adjusted to reflect the non-adjusting events

Non-adjusting events should be disclosed if they affect the users’ understanding of the FS

Examples
* Acquisition or disposal of a subsidiary after the year end
* Announcements of a plan to discontinue an operation
* Destruction of an asset by fire or flood after the reporting date
* Announcements of a plan to restructure
* Share capital transactions after the reporting date
* Changes in taxation or exchange rates after the reporting date
* Strikes or other labour disputes
* Equity dividends declared after the reporting period but before the financial statements are authorised for issue.

Question 3

What if the entity is no longer a going concern

Answer 3

If an event after the reporting period indicates that the entity is no longer a going concern, the financial statements for the current period should not be prepared on the going concern basis.

Question 4

What situation should an event after the reporting period be disclosed by note

Answer 4

A non-adjusting event after the reporting date should be disclosed (by note) where the event has a material effect on the financial statements.

The note should disclose

• The nature of the event
• An estimate of the financial effect, or a statement that it is not practicable to make such an estimate. The estimate should be made before taking account of taxation, with an explanation of the taxation implications where necessary for proper understanding of the financial position
• The date the directors approve the financial statements. The date which the financial statements are authorised for issue should be disclosed.