IAS 10 (Events After The Reporting Period)

Question 1

What are adjusting events?

Answer 1

Events after the reporting date that provide additional evidence of conditions existing at the reporting date.

Question 2

What are non-adjusting events?

Answer 2

Events after the reporting date the concern conditions that arose after the reporting date.

Question 3

Is the discovery of fraud or errors adjusting or non-adjusting?

Answer 3

An adjusting event.

Question 4

What are events after the reporting period?

Answer 4

Events, both favorable and unfavorable, which occur between the reporting date and the date on which the financial statements are approved for issue by the board of directors.

Question 5

Why is irrecoverable debts arising after the reporting date and adjusting event?

Answer 5

Because it will help to quantify the allowance for receivables as at the reporting date.

Question 6

Are amounts received or receivable in respect of insurance claims which were being negotiated at the reporting date adjusting or non- adjusting?

Answer 6

Adjusting because there were conditions existing at the reporting date.

Question 7

Is a business merger taking place after the reporting date an adjusting or non-adjusting event?

Answer 7

Non-adjusting, because there were no conditions existing before the reporting date.

Question 8

Is a fire or flood which destroys stock or a warehouse which happened after the reporting date an adjusting or non-adjusting event?

Answer 8

Non-adjusting.

Question 9

When accounting for adjusting/non-adjusting events, what’s the difference in terms of affects to the financial statements?

Answer 9

Adjusting = adjust accounts.

Non-adjusting = disclose in the notes.

Question 10

If shares / dividends have been proposed but not paid before the reporting date, and then subsequently paid before the accounts are signed off, will this be an adjusting or non-adjusting event?

Answer 10

We account for dividends on a cash basis so they are non-adjusting events, and must be disclosed by note as required by IAS 1. So, there must NOT be a liability at the reporting date.

Question 11

Non-adjusting events should be disclosed by note only in the accounts and there should be NO adjustments to the amounts in the financial statements. What details should this note contain?

Answer 11

The note should disclose the nature of the event and an estimate of the financial effect, or a statement that such an estimate cannot be made.

Question 12

If an adjusting event arises before the accounts are approved by the board of directors, how should adjusting events be accounted for in the financial statements?

Answer 12

Adjusting events require the adjustment of amounts recognised in the financial statements.

Question 13

What are non-adjusting events?

Answer 13

Events arising after the reporting date but which do not concern situations existing at the reporting date. Such events will not, therefore, have any effect on items in the statement of financial position or SOPL.

Question 14

What should be contained in the notes in the accounts for non-adjusting events?

Answer 14

• The nature of the event

- An estimate of its financial effect, or a statement that such an estimate cannot be made

Question 15

If an event after the reporting date indicates that the going concern assumption is inappropriate for the entity, how should the financial statements be prepared?

Answer 15

On a break-up basis.

Question 16

Describe two examples of non-adjusting events?

Answer 16

• Proposed dividends but approved and paid after the reporting date. We account for dividends on a cash-basis.
• Abnormally large changes in asset prices or foreign exchange rates after the reporting date/
• A major business combination/merger after the reporting date.
• The destruction of a major production plant or stock by fire or flood after the reporting date.

Question 17

Describe three examples of adjusting events?

Answer 17

• Irrecoverable debts arising after the reporting date, which may help to quantity the allowance for receivables as at the reporting date.
  Sale of inventory below cost, providing evidence of net realisable value.
• Amounts received or receivable in respect of insurance claims which were being negotiated at the reporting date.
• The discovery of fraud or errors.

Question 18

Do we need to add notes in the accounts for adjusting events?

Answer 18

No further disclosure is necessary for adjusting event apart from adjusting the amounts recognized in the financial statements.

Question 19

True or false - dividends proposed before but declared after the reporting date may be included as liabilities at the reporting date.

Answer 19

False. The liability arises at the declaration date, so they are non-adjusting events after the reporting date and must be disclosed by note as required by IAS 1.

Question 20

Why should non-adjusting events be disclosed by note?

Answer 20

Because they are of such importance that non-disclosure would affect the ability of the users of the financial statements to make proper evaluations and decisions. For example, an uninsured loss arising from a fire that occurred after the reporting date.