Events After the Reporting Date - IAS - 10

• Syllabus

 5. Other Reporting
IAS 10 Events after the Reporting Period
IAS 37 Provisions, Contingent Liabilities and Contingent Assets

 Chapter learning objectives

 Identify and account for events after reporting period

© 2009 Prentice-Hall, Inc. 6–1

 Financial Statements Related Dates
Year End:31 December 2022

Audited Financial Statements:

Approval of Financial Statements By Board of Directors: by whom?

Filing with SECP: Listed Companies? Unlisted Companies?

AGM: ?

© 2009 Prentice-Hall, Inc. 6–2

 Events after the Reporting Period

are those events which occur between reporting date and the date on which financial
statements are approved for issue by board of directors.

Events After the Reporting Date are classified as

a. Adjusting events which provide additional evidence of conditions existing at reporting date.

Examples of adjusting events:

• Irrecoverable debts arising after reporting date, which help quantify allowance for receivables at
reporting date
• Allowances for inventories due to evidence of net realisable value
• Amounts received / receivable for insurance claims which were being negotiated at reporting date
• The discovery of fraud or errors.

© 2009 Prentice-Hall, Inc. 6–3

 Events after the Reporting Period

b. Non-adjusting events are events after reporting date which concern conditions that arose
after reporting date.
Examples of non-adjusting events:
• a major business combination after reporting date
• the destruction of a major production plant by a fire after reporting date
• abnormally large changes after reporting date in asset prices or foreign exchange rates.

© 2009 Prentice-Hall, Inc. 6–4

 Example 1
Classify following events after reporting period as adjusting or non-adjusting:
(a) Creative Textile Limited decided to takeover Saga Sports Limited after the reporting period.

(b) QSA Surgical announces a plan to discontinue its Marala branch after the reporting period.

(c) Sale of inventory after reporting period below its cost & also below its NRV.

(d) Changes in tax rates after reporting period having a significant effect on current & deferred tax.

(e) A doubtful customer defaults after reporting period; provision for such customer was made @ 10%.

(f) Asset purchased on 27 Dec 20X4, invoice received on 5 Jan 20X5. Year ends on 31 Dec 20X4.

(g) The discovery of fraud that shows that the financial statements are incorrect.

© 2009 Prentice-Hall, Inc. 6–5

 Accounting for Adjusting & Non-Adjusting Events

Adjusting events after the reporting period

An entity shall adjust amounts recognised in financial statements to reflect adjusting events after reporting period.

Non-adjusting events after the reporting period

An entity shall not adjust amounts recognised in financial statements to reflect non-adjusting events after
reporting period. It shall only be disclosed.

Destruction of a major production plant by a fire after reporting period;

Announcing, or commencing implementation of, a major restructuring;

Changes in tax rates after reporting period that have a significant effect on current & deferred tax

Entering into contingent liabilities, for example issuing significant guarantees; and

Major litigation arising, solely out of events that occurred after the balance sheet date.
© 2009 Prentice-Hall, Inc. 6–6
 Disclosures – Non-Adjusting Events

 If non-adjusting events are material (i.e. non-disclosure could influence decisions of users), entity
shall disclose following for each material category of non-adjusting event:

(a) nature of event; and

(b) an estimate of its financial effect, or a statement that such an estimate cannot be made

© 2009 Prentice-Hall, Inc. 6–7

 Disclosures

Date of authorisation for issue

 An entity shall disclose date when financial statements were authorised for issue & who gave that
authorization.
Its important for user to know when financials were authorized as events after this date aren't reflected

Updating disclosure about conditions at the end of the reporting period

 If entity receives information after reporting period about conditions that existed at end of reporting
period, it shall update disclosures that relate to those conditions, in light of new information.

© 2009 Prentice-Hall, Inc. 6–8

 Disclosures – Non-Adjusting Events

 If non-adjusting events are material (i.e. non-disclosure could influence decisions of users), entity
shall disclose following for each material category of non-adjusting event:

(a) nature of event; and

(b) an estimate of its financial effect, or a statement that such an estimate cannot be made

© 2009 Prentice-Hall, Inc. 6–9

 Example 7

Disclosures
 Date of authorization for issue
Financial statements have been authorized for issue on February 18, 20X4.

 Updating of disclosures about conditions existed at the end of the reporting period
There is a case pending in High Court at end of reporting period it is probable that Rs. 5M would have to
be paid to settle claim. Till Feb 18, 20X4, case is still pending in Court and no decision has been made.

 Non-adjusting events after the reporting period

On Feb 10, one of major plant of company has been destroyed by fire and it was insured under a
deductible clause of Rs. 500,000. Up till now estimate of loss cannot be made.

© 2009 Prentice-Hall, Inc. 6 – 10

 DISCLOSURES

An entity shall disclose:

 (a) Amount of borrowing costs capitalised during the period;

 (b) Capitalisation rate used to determine amount of borrowing costs.

© 2009 Prentice-Hall, Inc. 6 – 11

 Excess of Carrying amount of Qualifying Asset over
Recoverable Amount

If carrying amount of qualifying asset exceeds its net realizable value, the carrying
amount is written down in accordance with requirements of other Standards

© 2009 Prentice-Hall, Inc. 6 – 12