IAS 10 - Events After the Reporting Period

Question 1

What does IAS 10 describe?

Answer 1

IAS 10 describes those events, favourable or unfavourable that occur between the end of the reporting period (YE) and the date when the FS are authorised for issue.

Question 2

What are the two types of events after the reporting period?

Answer 2

1) ADJUSTING EVENTS AFTER THE REPORTING PERIOD
2) NON-ADJUSTING EVENTS AFTER THE REPORTING PERIOD

Question 3

What is an adjusting event?

E.g.?

Answer 3

which provide evidence of conditions which existed at the end of the reporting period.

An e.g. of this is a court case that involved in at the year end and has been settled following and before the publication of results. this may provide more information as to what is going and therefore is necessary to disclose.

So essentially there is evidence of this at the year end and therefore require the FS to be adjusted.

Question 4

What is a non-adjusting event?

e.g?

Answer 4

These are those events that are indicative of conditions that arose after the reporting period

E.g.: a reduction in the value of an investment after the reporting period.

So essentially there is evidence of this at the year end and therefore require the FS to be adjusted.

Question 5

What are the accounting treatments for events after the reporting period?

Answer 5

ADJUSTING EVENTS AFTER THE REPORTING PERIOD = An entity should adjust the amounts recognised in its financial statements NON ADJUSTING EVENTS AFTER THE REPORTING PERIOD = An entity should not adjust the amounts recognised in its financial statements DIVIDENDS DECLARED = after the reporting period should not be recognised as a liability at the end of the reporting period because no obligation exists at that date.

Question 6

For a non-adjusting event you don’t need to adjust the FS. However, you may need to disclose. When will you need to do this?

Answer 6

For a non adjusting event you will need to disclose the information, given that it is material.

For whether it is material or not think about:

• The nature of the event.
• the financial effect the event has.

Question 7

What else must you consider for non-adjusting events? Explain, and why?

Answer 7

The going concern concept.

You prepare FS on the basis of a going concern. This means that the company can carry on operating for an indefinate period in the future.

For e.g. if a warehouse burned down after the reporting period and there was clearly no evidence of it being present at the end of the reporting period, will this have an impact on the going concern of the company? If it does then the FS cannot be prepared on a going concern basis. So when deciding that an event is non-adjusting consider the going concern, and therefore whether it should be an adjusting event or not?

If there is no talk about the going concern in the notes of a company etc then should it be an adjusting event? Probably not. Disclosures of why would be required. (see notes for Asian citrus holdings Ltd.)