CH 13 – EVENTS AFTER THE REPORTING PERIOD

EVENTS AFTER THE REPORTING PERIOD

• Those events, whether favorable or unfavorable, tat occur between the end of reporting period
and the date on which the financial statements are authorized for issue.
• Also known as subsequent events.
• May require either adjustment or disclosure.

TYPES OF EVENTS AFTER THE REPORTING PERIOD

• Adjusting events after the reporting period are those that provide evidence of conditions that
exist at the end of reporting period.
• Nonadjusting events after the reporting period are those that are indicative of conditions that
arise after the end of reporting period.
• An entity must adjust the amounts recognized in the financial statements for adjusting events
that provide evidence of conditions that existed at the end of reporting period.
• An entity does not recognize events after the reporting period that relate to conditions that only
arose after the reporting period.
• Entity is required to only disclose significant nonadjusting events.

Please check your book for examples of adjusting and nonadjusting events.

FINANCIAL STATEMENTS AUTHORIZED FOR ISSUE

• When the board of directors reviews the financial statements and authorizes them for issue.
• In some cases, entity is required to submit the financial statements to the shareholders for
approval after the financial statements have been issued.
• In such cases, the financial statements are authorized for issue on the date of issue by the board
of directors and not on the date when shareholders approve the financial statements.

Case #1: ABC Co. completes the draft of its December 31, 20x1 year-end

financial statements on January 31, 20x2. On February 5, 20x2, the board of directors reviews the financial
statements and authorizes them for issue. The entity announces its profit and selected other financial
information on February 23, 20x2. The financial statements are made available to shareholders and others
on March 1, 20x2. The shareholders approve the financial statements at their annual meeting on March
18. 20x2 and the approved financial statements are then med with a regulatory body on April 1. 20x2.

Analysis: The financial statements are authorized for issue on February 5, 20x2 (date of board
authorization for issue). Events after the reporting period will include events occurring from January 1,
20x2 to February 5, 20x2.

Case #2:

On March 1, 20x2, the management of ABC Co. authorizes financial statements for issue to its supervisory
board. The supervisory board is made up solely of non-executives and may include representatives of
employees and other outside interests. The supervisory board approves the financial statements on
March 10, 20x2. The financial statements are made available to shareholders and others on March 14,
20x2. The shareholders approve the financial statements at their annual meeting on March 23, 20x2 and
the financial statements are then filed with a regulatory body on April 1, 20x2.

Analysis: The financial statements are authorized for issue on March 1, 20x2 (date of management
authorization for issue to the supervisory board). E vents after the reporting period will include events
occurring from January 1, 20x2 to March 1, 20x2.