IAS 10 Events After the Reporting Period
Objective: To define events and describe the treatment of events after the reporting period.
31 Dec 13 Mar 2001 31 Mar 2001 31 Dec
2000 2001
AFI date AGM
date
Reporting
date Events after RD
Adjusting Non-Adjusting
Scope
IAS 10 should be applied in the accounting for, and the disclosure of, events after the reporting period.
Definition
Events after the reporting period—events, both favourable and unfavourable, which occur between
the end of the reporting period and the date on which the financial statements are authorised for
issue.
1
Two types of events after the reporting period can be identified:
1. Those which provide further evidence of conditions which existed at the end of the reporting period
("adjusting" events).
2. Those which are indicative of conditions which arose after the end of the reporting period ("non-
adjusting" events).
Adjusting Events
Summary of Adjusting events
- Condition exists at the end of reporting date
- Estimation or Error
An entity should adjust its financial statements for adjusting events after the end of the reporting
period.
Examples of adjusting events include:
✓ The resolution after the end of the reporting period of a court case which, because it confirms
that an entity already had a present obligation at the end of the reporting period, requires the
entity to recognise a provision instead of merely disclosing a contingent liability or adjusting
the provision already recognised.
✓ The bankruptcy of a customer which occurs after the end of the reporting period and which
confirms that a loss already existed at the end of the reporting period on a trade receivable
account.
✓ The discovery of fraud or error which show that the financial statements were incorrect.
✓ The sale of inventories after the year end at an amount below their cost.
Non-adjusting Events
No adjustment is made in financial statements for non-adjusting events after the end of the reporting
period.
2
However, non-adjusting events should be disclosed if 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.(material)
Examples of non-adjusting events include:
✓ A major business combination after the end of the reporting period.
✓ The destruction of a major production plant by a fire after the end of the reporting period.
✓ Abnormally large changes after the end of the reporting period in asset prices or foreign
exchange rates.
✓ A decline in market value of investments between the end of the reporting period and the
date on which the financial statements are authorised for issue.*
Dividends
Dividends proposed or declared after the end of the reporting period cannot be recognised as
liabilities (as they do not meet the definition of a liability).
IAS 1 requires an entity to disclose the amount of dividends which were proposed or declared after
the end of the reporting period but before the financial statements were authorized for issue. This
disclosure must be made in the notes to the accounts, not in the statement of financial position.
Going Concern
Financial statements should not be prepared on a going concern basis if management determines
after the end of the reporting period that:
✓ it intends to liquidate the entity or to cease trading; or
✓ it has no realistic alternative but to do so.
Deterioration in operating results and financial position after the end of the reporting period may
require reconsideration of the going concern assumption.
Disclosure
General
An entity should disclose the date when the financial statements were authorised for issue and the
name of the governing body which gives that authorisation.
If the entity's owners (or others) have the power to amend the financial statements after issue, that
fact must be stated.*
3
Non-adjusting Events
An entity should disclose the following in respect of non- adjusting events which are of such
importance that non- disclosure would affect the ability of the users of the financial statements to
make proper evaluations and decisions:
➢ the nature of the event; and
➢ an estimate of its financial effect or a statement that such an estimate cannot be made.
Going Concern
The following disclosures are required by IAS 1 if the accounts are not prepared on the basis of the
going concern assumption:
a note saying that the financial statements are not prepared on a going concern basis; or
management is aware of material uncertainties related to events or conditions, which may cast
significant doubt on the entity's ability to continue as a going concern.
