International Accounting

Standard- 10
Events after the Balance
Sheet Date / Events after
the Reporting Period
 Background
• Issued by International Accounting Standards
Committee in May 1999
• In April 2001 the International Accounting
Standards Board (IASB) adopted IAS 10
Events After the Balance Sheet Date
• Modified and revised in December 2003
 Objectives of the Standard
01. To identify the events occurring after the balance sheet
date.
02. To determine the extent which the adjustments to the
amounts recognized in the FSs are necessary and make
such adjustments.
03. In the case of events which do not require but occur
after the balance sheet date, impact shall be disclosed.
04. when an entity should adjust its financial statements for
events after the reporting period; and
05. The disclosures that an entity should give about the
date when the financial statements were authorized for
issue and about events after the reporting period.
 Scope of the Standard
1. This Standard applies in the accounting and
disclosure of all post-balance sheet events, both
favorable and unfavorable, that occur before the
date on which the FSs are authorized for issue.
2. This Standard prescribes the appropriate
accounting treatment for such events and whether
adjustments or simple disclosure is required.
3. This Standard requires an entity not to prepare its
FSs on a going concern basis if events after the
reporting period indicate that the going concern
assumption is not appropriate.
 Meaning of Events Occurring After
the Reporting Period
Events occurring after the reporting period are defined
as events which occur between the end of the reporting date
and the date when the financial statements are authorized for
issue by the Board of Directors. These events may be
favorable or unfavorable.
There are two types of events occurring after the
reporting period;
01. Those that provide evidence of conditions that existed at
the end of the reporting period (adjusting events after the
reporting period); and
02. Those that are indicative of conditions that arose after the
reporting period (non-adjusting events after the reporting
period).
 Events Occurring After the Reporting
Period / date

Adjusting Non- Adjusting

Events Events

Events that provide Events that arose after

evidence of conditions the reporting date
existed at the reporting
date
 Events after reporting date
ADJUSTING EVENTS
An event after the reporting date that
provides further evidence of conditions that
existed at the reporting date.
Examples:
Events that indicate that the going concern
assumption in relation to the whole or part of the
entity is not appropriate
Settlement after reporting date of court cases
that confirm the entity had a present obligation
at reporting date
Bankruptcy of a customer that occurs after
reporting date that confirms a loss existed at
reporting date on trade receivables
Sales of inventories after reporting date that give
evidence about their net realizable value at
reporting date
Determination after reporting date of cost of
assets purchased or proceeds from assets sold,
before reporting date
Discovery of fraud or errors that show the
financial statements are incorrect.
NON-ADJUSTING EVENTS
An event after the reporting date that is indicative
of a condition that arose after the reporting date.
Examples:
Major business combinations or disposal of a
subsidiary
Major purchase or disposal of assets,
classification of assets as held for sale or
expropriation of major assets by government
Destruction of a major production plant by fire
after reporting date
Announcing a plan to discontinue operations
Announcing a major restructuring after reporting
date
Major ordinary share transactions
Abnormal large changes after the reporting
period in assets prices or foreign exchange rates
Changes in tax rates or tax law
Entering into major commitments such as
guarantees
Commencing major litigation arising solely out
of events that occurred after the reporting period.
 Date of Authorization of Financial
Statements
The date of authorization of financial statements
are depends upon:

01.The date of authorization of financial

statements are depends upon the management
structure and statutory requirements. In company
form, normally, the BOD authorize the financial
statements for issue.
 Example:
What should be the Solution
authorization date?
Management prepares the draft financial
statements for the year 2012 on 31-1-
2013
Board of Directors approve financial Financial statements are authorized on 10-2-
2013 the date on which the BOD approved.
statements for issue on 10-2-2013
The company releases summary financial
information on 11-2-2013
Financial statements are made available
to the shareholders and others on 15-2-
2013
Financial statements are placed before
the AGM of the shareholders and
approved in the meeting on 13-3-2013
Financial statements are filed with the
regulatory authorities on 17-3-2013
 Example:
The management of an entity completes draft financial
statements for the year to 31 December 2012 on 28 February
2013. On 18 March 2013, the board of directors reviews the
financial statements and authorizes them for issue. The entity
announces its profit and selected other financial information
on 19 March 2013. The financial statements are made
available to shareholders and others on 1 April 2013. The
shareholders approve the financial statements at their annual
meeting on 15 May 2013 and the approved financial
statements are then filed with a regulatory body on 17 May
2013.

The financial statements are authorized for issue on

18 March 2013 (date of board authorization for issue).
Accounting Treatment of Adjusting Events

Accounting Events:
An entity should adjust its financial
statements for events after the reporting date that
provide further evidence of conditions that
existed at the reporting date. An entity should not
adjust its financial statements for events after the
reporting date that are indicative of conditions
that arose after the reporting date.
 Examples of adjusting events:
01. Settlement of a court case after the
reporting date.
A client sued the company for damage against
the company’s failure to fulfill warranty
amounting to Rs.2 lacs. The company created a
provision of Rs.1 lac based on legal advise. After
the reporting date but before the date of
authorization of financial statements the court
decided against the company and a compensation
of Rs.1.5 lac was awarded.
What should the company do?
 Example No.2:
Inventories sold after the reporting date provides
indication of net realizable value.
Entity ‘A’ valued 10000 units of finished
goods at cost of Rs.40000 which was lower than the
estimated net realizable value of Rs.42000. The
entity could obtain recent selling price of those
finished goods as there was arm’s length customer
available. The net realizable value was obtained
based on the selling price of the same goods a
fortnight back. The reporting date of the entity was
31-12-2012. The BOD approved the financial
statements on 15-1-2013. However, on 3-1-2013 the
entity sold a lot of these goods @ Rs.3.5 per unit.
What should be the value of inventory?
 Example No.3:
Bankruptcy of a customer after the reporting date confirms
that a loss already existed at the reporting date.
A trade debtor (` 10 lakhs) defaulted on the due date of
3rd January, 2013. The reporting date of the entity was 31st
December, 2012. The Board of Directors approved the FSs
on 15th January, 2013.
Apart from the usual steps taken for the recovery of
debt, a provision (` 5 lakhs) has been created on the reporting
date. An information about the possible bankruptcy of the
debtors is also pending consideration of the management. A
possible recovery amount (` 3 lakhs) has also been worked
out in the eventuality of the bankruptcy. But the additional
provision has not been created as the new was not confirmed.
The debtor declares himself bankrupt on 2nd January, 2013.
What is the company’s steps?
 Example No 4;
Determination of the cost of the assets purchased or proceeds of assets sold
after the reporting period although purchase/ sale took place on or before the
reporting date.
A company purchased a plant on 1st December, 2012 for ` 12 lakhs.
The agent of the company organized dispatch of the plant on 15th December,
2012 – the transportation charge was 80,000 and agent’s commission was
90,000. the plant is to be installed under the guidance of an expert. The seller
has organized an expert – the buyer has to pay his fees. The expert commenced
installation work but his fee was under negotiation – the company worked out
the fee should be in the range of ` 300,000 (expert’s quotation) and ` 150,000
(company’s quotation).
The reporting date of the company was 31st December, 2012. The
Board of Directors approved the FSs on 15th January, 2013. On 10th January,
2013, the expert and the company agreed upon for a fee of ` 250,000. The
company already made a provision of ` 150,000 and added that to the cost of
the asset.
Should the additional amount be added to the cost of the plant?
 Accounting Treatment of Non-
adjusting Events
An entity should not adjust the amount recognized
in its financial statements to reflect non-adjusting
events which are occurring after the reporting date
for which no condition was prevailing on or before
the reporting date. If events occur after the balance
sheet date that do not affect the condition of assets
and liabilities at the balance sheet date, no
adjustment is required. However, disclosure should
be made of such events if they are of such
importance that non-disclosure would affect
decisions made by users of FSs.
 Example No.7:
Decline in market value of investments after the
reporting date
A company follows calendar year as the accounting
year. It has classified investments as held for trading
and therefore, they are valued at market price which is
fair value of such investments. The company computed
fair value of those held for trading investments with
reference to market price prevalent as on the reporting
date i.e., 31-12-2012. There is a decline in the market
price of that stock after 31-12-2012 and such decline
continued till 15-02-2013, the date on which the
financial statements are authorized.
Should the company adjust the fair value for
market price change arising after the reporting date?
 Sometimes non-adjusting events are so
significant that their non-disclosure would affect
the understanding about the financial statements.
Users would not be able to evaluate financial
statements in absence of such disclosures, in that
case additional disclosures are necessary for each
significant category of non-adjusting event
occurring after the reporting date stating;
1. The nature of the event
2. An estimate of its financial effect [Para 21 of
IAS 10].
Examples of such non-adjusting events are;
 Disclosures
IAS 10 requires the following disclosures;
01. Disclosure of authorization:
Any entity should disclose the date when the financial
statements were authorized for issue and who gave that
authorization. If the entity’s owners or others have the
power to amend the financial statements after issuance,
the entity should disclose that fact.
02. Updating Disclosures:
An entity shall update disclosures that relate to the
conditions that existed at the reporting date in the light
of any new information that it receives after the
reporting date about those conditions.