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MFRS 110

EVENTS AFTER THE REPORTING PERIOD

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Definition

‘those events,
MFRS 110 defines events after the reporting date as
both favourable and unfavourable, that occur between the
end of the reporting period and the date when the
financial statements are authorised for issue’.
The standard has identified two types of events.
They are:
a. Adjusting events : Those events that provide further
evidence of conditions that existed at the end of the reporting
period, and
b. Non-adjusting events. Those that are indicative of conditions
that arose after the end of the reporting period
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Reason for considering events after

reporting period….
It is important to consider events after reporting period
because:
it may provide any unresolved issues as at financial year
end,
it provides further evidence as to the appropriateness of
the accounting treatment adopted as at financial year end,
may have significant impact on the future operations of
the entity which requires for disclosure.
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Date When The Financial Statements Are Authorised

For Issue
Recall this from earlier provided information…
MFRS 110 defines events after the reporting date as ‘those events, both
favourable and unfavourable, that occur between the end of the
reporting period and the date when the financial statements are
authorised for issue’.

Events after reporting period accounted for under

MFRS110

Date authorised for issue

FYE: 31/12/2018 Eg 31/3.2019

The date on which the financial statements are authorised for issue
depends on the management structure, statutory requirements and
procedures followed by each entity in preparing and finalising the
financial statements.
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So….what should be done with those

events that occurred between those dates?
• Referring back to the definition, if the events falls under
the definition of adjusting events, then those events
need to be adjusted accordingly. Adjusted means a
journal entries need to be recorded to reflect the effect of
the events.
• If the events falls under Non-Adjusting events, then no
adjustment is required to the financial statement but a
DISCLOSURE of the nature and effect of the events
should be disclosed in the NOTES TO THE FINANCIAL
STATEMENTS.
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Adjusting Events

• Adjusting affect the financial position and

events
performance measurement of the entity even though they
occurred between the reporting date and the date the financial
statements were authorised for issue.
• The accounting treatment is to adjust the elements of financial
statements affected by these events.
• Measurement of bad and doubtful debts
• Determining the net realisable value of inventory
• Court case
• Impairment of assets
• Cost of assets purchased or proceeds from disposal of assets
• Profit sharing or bonus
• Fraud
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Illustrative Example
• Extract of Statement of Financial Position as at
31/12/2018
• Current Assets RM’000
• Inventory 900
• Trade Receivables 1,200
Additional information:
The financial statements was authorised for issue on 1 April
2019.
1) On 2 February 2019, one of the trade receivable
included in the Trade Receivable amount as of
31/12/2018, was declared bankrupt. The amount
involved was RM150,000.
2) On 15 March, the net realisable value of inventory was
determined to be at RM600,000.
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Illustrative Example
Required:
Explain the accounting treatment of the events after
reporting period for situation 1 and 2.
1) On 2 February 2019, one of the trade receivable
included in the Trade Receivable amount as of 31/12/2018,
was declared bankrupt. The amount involved was
RM150,000.
• Answer:
The company should make an adjustment on the financial
statements of 31 December 2018 by decreasing the
accounts receivable by RM150,000 and decreasing the
allowance for impairment of trade receivables by
RM150,000.
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Illustrative Example
• Required:
• Explain the accounting treatment of the events after
reporting period for situation 1 and 2.
2) On 15 March, the net realisable value of inventory was
determined to be at RM600,000.
Answer:
The company should make an adjustment on the financial
statements of 31 December 2018 by increasing the cost of
sales by RM300,000 (RM900,000-RM600,000) and
decrease the inventory amount by RM300,000.
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Non-Adjusting Events

For non-adjusting events, no adjustments are made but the following

disclosure should be provided:
• the nature of the event, and
• the estimate of the financial effect, or a statement that such an
estimate cannot be made.

Examples of non-adjusting events:

 Decline in the market value of investments after the reporting
date,
 A major business combination after the reporting date
 Announcing a plan to discontinue an operation, disposing of
assets etc.
 Major purchases and disposals of assets or expropriation of
major assets by government.
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• destruction of a major production plant by a fire after the balance

sheet date.
• a major restructuring
• Major ordinary share transactions
• Changes in tax rates or tax laws
• Entering into significant commitments or contingent liabilities
• Commencing major litigation arising solely out of events that
occurred after the reporting date.
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Dividends and Going Concern Status

• Dividends
Proposed dividends are not present obligations and are not to be
recognised as liabilities. A disclosure is required.

• Going Concern Status

Where the management determines after the reporting date that it
intends to liquidate the entity or to cease trading, or that it has no
realistic alternative but to do so, then the going concern assumption
used in preparing the financial statements may no longer be
appropriate. Financial statements are to be prepared on a liquidation
basis.
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Disclosure requirements
• An entity shall disclose the date when the financial
statements were authorised for issue and who gave that
authorisation. If the entity’s owners or others have the
power to amend the financial statements after issue, the
entity shall disclose that fact.
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Disclosure requirements
• An entity shall disclose the following for each category of
non-adjusting event after the end of the reporting period:
(a) the nature of the event, and
(b) an estimate of its financial effect, or a statement that
such an estimate cannot be made.
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Illustrative example (Non – Adjusting

Events)
Kristal Bhd incurred a loss of RM750,000 when its warehouse was
damaged due to a fire on 27 July 2019. The insurance company was
willing to compensate RM375,000. The company remains as a going
concern. The Financial Statement was authorised for issue on 1
September 2019.
Required:
Explain the accounting treatment of the events after reporting period for
its financial year ended 30 June 2019.
Answer:
The company should disclose in the notes to the financial statements
for the year ended 30 June 2019 regarding the nature and event ie the
destruction on warehouse due to fire and the estimated financial loss of
RM375,000 (RM750K-RM375K)