Events After the Reporting Period (PAS 10) & Related Party Disclosures (PAS 24)

Introduction OF PAS 10:

PAS 10 prescribes the accounting for, and disclosure of, events after the reporting period, including
disclosures regarding the date when the financial statements were authorized for issue.
Events after the reporting period:
Events after the reporting period are “those events, favorable and unfavorable, that occur between the
end of the reporting and the date when the financial statements are authorized for issue.”
Two types of events after the reporting period:
1) Adjusting Events after the reporting period are those that exist at the end of the reporting
period.
2) Non-adjusting Events after the reporting period are those that are indicative of conditions that
arise after the end of the reporting period.
Examples of Adjusting Events:
a) The settlement after the reporting period of a court case that confirms that the entity has a present
obligation at the end of the reporting period
b) The receipt of information after the reporting period indicating that an asset was impaired at the
end of the reporting period. Examples:
 The bankruptcy of a customer that occurs after the reporting period may indicate that the
carrying amount of a trade receivable at the end of the reporting period is impaired.
 The sale of inventories after the reporting period may give evidence to their NRV at the
end of the reporting period.
c) The determination after the reporting period of the cost of asset purchased, or the proceeds from
asset sold, before the end of the reporting period.
d) The determination after the reporting period of the amount of profit-sharing or bonus payments if
the entity had a present legal or constructive obligation at the end of the reporting period to make
such payments.
e) The discovery of fraud or errors that indicate that the financial statements are incorrect.

Examples of Non-Adjusting Events

Non-adjusting events do not require adjustments of amounts in the financial statements. However, they
are disclosed if they are material. Examples of non-adjusting events.
Examples of non-adjusting events
1) Business combination after the reporting period.
2) Plan to discontinue an operation.
3) Major purchase and disposal of asset or expropriation of major asset by government.
4) Destruction of a major production plant by a fire after the reporting period.
5) Major ordinary share transactions and potential ordinary share transactions after the reporting
period.
6) Announcing or commencing the implementation of a major restructuring.
7) Abnormally large changes after the reporting period in asset prices or foreign exchange rates.
8) Entering significant commitments or contingent liabilities, for example, by issuing guarantees.
9) Commencing major litigation arising solely from events that occurred after the reporting period.
10) Change in tax rate enacted or announced after the end of reporting period that has a significant
effect on current and deferred tax asset and liability.
Financial Statements Authorized for Issue & Illustrations

Financial statements are authorized for issue when the

board of the rectors reviews the financial statements and
authorizes them issue. 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.

 The management of an entity completes draft financial statements for the year to 31 December
20X1 on 28 February 20X2. On 18 March 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 19 March 20X2. The financial statements are made available to
shareholders and others on 1 April 20X2. The shareholders approve the financial statements at
their annual meeting on 15 May 20X2 and the approved financial statements are then filed with a
regulatory body on 17 May 20X2.
True or False [ The financial statements are authorized for issue on 15 May 20X2 (dated of board
authorization for issue)]
 True On 18 March 20X2, the management of an entity 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 26 March 20X2. The financial statements are made available to
 shareholders and others on 1 April 20X2. The shareholders approve the financial statements at
their annual meeting on 15 May 20X2 and the financial statements are then filed with a
regulatory body on 17 May 20X2.
True or False [The financial statements are authorized for issue on 18 March 20X2 (date of
management authorization for issue to the supervisory board)]

Disclosure of Date of Authorization for Issue & Dividends and Going

• Date of authorization for issue - An entity shall 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 issue, the entity shall disclose that fact.
• Updating disclosure about conditions at the balance sheet date - If an entity receives information
after the balance sheet date about conditions that existed at the balance sheet date, it shall update
disclosures that relate to those conditions, in the light of the new information.
• Non-adjusting events after the balance sheet date - If non-adjusting events after the balance sheet
date are material, nondisclosure could influence the economic decisions of users taken on the
basis of the financial statements. Accordingly, an entity shall disclose the following for each
material category of non-adjusting event after the balance sheet date:
a) the nature of the event; and
b) an estimate of its financial effect, or a statement that such an estimate cannot be made.
Examples of non-adjusting events after the balance sheet date that would generally result in disclosure:
a) a major business combination after the balance sheet date (IFRS 3 Business Combinations
requires specific disclosures in such cases) or disposing of a major subsidiary.
b) announcing a plan to discontinue an operation.
c) major purchases of assets, classification of assets as held for sale in accordance with IFRS 5
Non-current Assets Held for Sale and Discontinued Operations, other disposals of assets, or
expropriation of major assets by government.
d) the destruction of a major production plant by a fire after the balance sheet date;
e) announcing, or commencing the implementation of, a major restructuring (see IAS 37);
f) major ordinary share transactions and potential ordinary share transactions after the balance sheet
date (IAS 33 Earnings per Share requires an entity to disclose a description of such transactions,
other than when such transactions involve capitalization or bonus issues, share splits or reverse
share splits all of which are required to be adjusted under IAS 33);
g) abnormally large changes after the balance sheet date in asset prices or foreign exchange rates;
h) changes in tax rates or tax laws enacted or announced after the balance sheet date that have a
significant effect on current and deferred tax assets and liabilities (see IAS 12 Income Taxes);
 i) entering into significant commitments or contingent liabilities, for example, by issuing
significant guarantees; and
j) commencing major litigation arising solely out of events that occurred after the balance sheet
date.
Dividends:
If an entity declares dividends to holders of equity instruments (as defined in IAS 32 Financial
Instruments: Presentation) after the balance sheet date, the entity shall not recognize those dividends as
a liability at the balance sheet date.
Going Concern:
An entity shall not prepare its financial statements on a going concern basis if management determines
after the balance sheet date either that it intends to liquidate the entity or to cease trading, or that it has
no realistic alternative but to do so.
IAS 1 specifies required disclosures if:
a) the financial statements are not prepared on a going concern basis; or
b) management is aware of material uncertainties related to events or conditions that may cast
significant doubt upon the entity’s ability to continue as a going concern. The events or
conditions requiring disclosure may arise after the balance sheet date.
Introduction & Definition of PAS 24:
PAS 24 prescribes the guidelines in identifying related party transactions, outstanding balances and
commitments, and the necessary disclosures for these items.
Related party relationships are a common feature of business. For example, the companies operating
under the trade names “Chowking,” “Greenwich,” “Red Ribbon,” “Burger King,” and “Mang Inasal”
are all subsidiaries of Jollibee Foods Corporation, the parent company. All these companies are related
parties. Collectively, they are referred to as the ‘Jollibee Group.
Related party disclosures are necessary to indicate the possibility that an entity’s financial position and
performance might have been affected by the existence of such relationship. This is because related
parties often enter into transactions that unrelated parties would not. For example, a subsidiary might
sell goods to its parent at preferential rates that are unavailable to unrelated parties.
Sometimes the mere existence of a related party relationship is sufficient to affect an entity’s financial
position and performance even in the absence of related party transactions. For example, a parent might
dictate a subsidiary’s choice of supplier.
Related Parties and Examples:
a) Ability to control the other party
b) Ability to exercise significant influence over the party
 c) Joint control over the entity
EXAMPLES:
1. Associates
2. Key Management Personnel
3. Venturer
4. Close Family Members
5. Individual owning directly or indirectly an interest on the voting power of reporting entity
6. Post-employment benefits plan
Not Related Parties and Examples:
The following are not related parties:
a) Two entities simply because they have one director or key management personnel in common.

b) Two joint venturers simply because they are co-venturers in a joint venture.

c) Financers, trade unions, public utilities, and government agencies that do not control,
jointly control or significantly influence the reporting entity, simply by virtue of their normal
dealings with the entity, even though they may place some restrictions on the entity or participate
in its decision-makings.
 d) A customer, supplier, or other business that the entity does significant transactions with, simply
because of economic dependence.
e)

Disclosures, Relationships Between Parents & Subsidiaries, And Key Management Personnel
Compensation:
Non- adjusting events should be disclosed if they are of such importance that non-disclosure would
affect the ability of users to make proper evaluations and decisions. The required disclosure is (a) the
nature of the event and (b) an estimate of its financial effect or a statement that a reasonable estimate
of the effect cannot be made.
A company should update disclosures that relate to conditions that existed at the reporting period to
reflect any new information that it receives after reporting period about those conditions.
Companies must disclose the date when the financial statements were authorized for issue and who
gave that authorization. If the enterprise’s owners or others have the power to amend the financial
statements after issuance, the enterprise must disclose that fact.
Relationships Between Parents and Subsidiaries:
 Regardless of whether there have been transactions between a parent and a subsidiary, an
entity must disclose the name of its parent and, if different, the ultimate controlling party.
 If neither the entity’s parent nor the ultimate controlling party produces financial statements
available for public use, the name of the next most senior parent that does so must also be
disclosed
Key Management Personnel Compensation:
Disclose key management personnel compensation in total for each of the following categories:
 Short term employee benefits
 Post-employment benefits
 Other long-term benefits
 Termination benefits
  Equity compensation benefits.
Key management personnel are those persons having authority and responsibility for planning, directing,
and controlling the activities of the entity, directly or indirectly, including any directors (whether
executive or otherwise) of the entity.
Related Party Transactions:
 is a transfer of resources or obligations between related parties, regardless of whether a price is
charged.
EXAMPLES:
1. Purchase and sale of goods
2. Purchase and sale of property and other asset
3. Rendering or receiving services
4. Leases
5. Transfer of research and development
6. License agreement
7. Finance arrangements, including loans and equity contributions in cash or kinds
8. Guarantee and collateral
9. Settlement of liabilities on behalf of the entity or by the entity on behalf of another party
10. Participation by a parent or subsidiary in a defined benefit plan wherein risks are shared
The following are disclosed when there are related party transactions during the periods covered by the
financial statements:
 Nature of the related party relationship
 Nature, terms, and amount of the transaction and outstanding balances
 Doubtful debts recognized on the outstanding balances
Related party transactions and their outstanding balances are disclosed in an entity’s separate or
individual financial statements. These, however, are eliminated in the group’s consolidated financial
statements.

Disclosure Of Related Party Transactions:

PAS 24, paragraph 17, provides that if there have been transactions between related parties, an
entity shall disclose the nature of the related party relationship as well as information about the
transactions and outstanding balances necessary for an understanding of the financial statements.
As a minimum, the disclosures of related party transaction shall include:
a) The amount of the transaction.
b) The amount of outstanding balance, terms and conditions, whether secured or unsecured and
nature of consideration to be provided in settlement.
c) The allowance for doubtful accounts related to the outstanding balance.
d) The doubtful accounts expense recognized during the period in respect of amount due from
related parties.

Government Related Entities:

A government related entity is "an entity that is controlled, jointly controlled or significantly
influenced by a government.
A government related entity discloses the following if there have been related party transactions
with the government:
a. name of the government and nature of the relationship
b. nature and amount of each individually significant transaction
c. other transactions that are collectively significant but are individually significant