NAS 10 Events

after the
Reporting Period
CA Saugat Gautam
Definition
Events after the reporting period are those events, favourable and unfavourable, that
occur between the end of the reporting period and the date when the financial statements
are authorised for issue. Two types of events can be identified:
(a) those that provide evidence of conditions that existed at the end of the
reporting period (adjusting events after the reporting period); and
(b) those that are indicative of conditions that arose after the reporting period
(non-adjusting events after the reporting period).
Reporting period Covered by NAS 10 Not Covered by NAS 10

Reporting BOD signs AGM

date Date when the Financial statements
financial statements are approved by the
are authorized for shareholders.
issue

Events -36gf_
Events after the
reporting period

Non-adjusting
Adjusting events events

To be adjusted in Not adjusted but

the reporing period disclosed if material.
Adjusting Events
▪ those that provide evidence of
conditions that existed at the end
of the reporting period.
▪ An entity shall adjust the amounts
recognised in its financial
statements to reflect adjusting
events after the reporting period.
 Provisions/Contingent Liabilities
▪ the settlement after the reporting period of a court case that confirms that the entity
had a present obligation at the end of the reporting period.

31st Ashadh 2080

Entity is facing a legal suit for claim of The statement from an eye-witness Date of
damages worth Rs. 2,00,000. The changed the face of the case. It looked authorization for
management estimates that it will win like now the entity will lose the case. issue
the case. Hence, no provision is
recognized. This event (eye-witness)
provides evidence of:

ADJUSTING EVENT
Condition (legal suit) that existed
Hence, a provision of Rs. 2 lakh
at the reporting date.
should be recognized in 2079-80.
 Debtors/Receivable
▪ the bankruptcy of a customer that occurs after the reporting period usually confirms that the
customer was credit-impaired at the end of the reporting period.

31st Ashadh 2080

A debtor of Rs. 10 lakh is The proceedings completed. The court Date of

facing insolvency decided that the debtor could pay only authorization for
proceedings. The entity 70% for its claim. issue
estimates that all amount will
be recovered. Hence, no This event (bankruptcy)
impairment was booked. provides evidence of:

Condition (inability of debtor to repay) ADJUSTING EVENT

that existed at the reporting date. Hence, an impairment (bad debt)
of Rs. 3 lakh should be
recognized in 2079-80.
31st Ashadh 2080

A debtor of Rs. 10 lakh is in Fire occurred at the debtor's place, as a Date of

sound financial position. result no amount is estimated to be authorization for
recovered from the debtor. issue

This event (fire) provides

evidence of:

Condition (inability of debtor to repay),

which arose after the reporting period.
NON -ADJUSTING EVENT
Hence, an impairment (bad debt) of
Rs. 10 lakh should be recognized in
2080-81, not in 2079-80.
This may be disclosed based on
materiality.
 Net Realisable Value - Inventories
▪ the sale of inventories after the reporting period may give evidence about their net realisable
value at the end of the reporting period.

31st Ashadh 2080

Entity has inventory of cost With the same market conditions, the Date of
Rs. 100. It estimates that it inventory could be sold at only Rs. 90 authorization for
can be sold at Rs. 110. issue

This event (sale of inventory)

provides evidence of:

Condition (net realizable value of inventory) ADJUSTING EVENT

that existed at the reporting date.
Hence, an impairment (write
down) of Rs. 10 should be
recognized in 2079-80.
 Fraud/Error
▪ the discovery of fraud or errors that show that the financial statements are incorrect.

31st Ashadh 2080

The net profit stood at Rs. 10 It was found that depreciation on an Date of
lakh. asset was overstated by Rs. 50,000. authorization for
issue

This event (discovery of error)

provides evidence of:

Condition (amount of expenses) that ADJUSTING EVENT

existed at the reporting date. Hence, depreciation of Rs. 50,000
should be reversed in 2079-80.
 Staff Bonus
▪ 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 as a result of events before that date

31st Ashadh 2080

The net profit stood at Rs. 10 It was found that depreciation on an Date of
lakh. Hence, a staff bonus asset was overstated by Rs. 50,000, authorization for
provision of Rs. 1 lakh was hence revised net profit stood Rs. issue
recognized. 10,50,000.
This event (determination of profit)
provides evidence of:

Condition (provision for staff bonus) that ADJUSTING EVENT

existed at the reporting date.
Hence, an additional staff bonus
provision of Rs. 5,000 should be
recognized in 2079-80.
 those that are indicative of conditions
that arose after the reporting period

Non- An entity shall not adjust the amounts

recognised in its financial statements to
adjusting reflect non-adjusting events after the
reporting period.
event
However, such events shall be
disclosed, if material.
Examples of non-adjusting events
a major business combination after the reporting period or disposing of a major
subsidiary;

announcing a plan to discontinue an operation

major purchases of assets, classification of assets as held for sale

the destruction of a major production plant by a fire after the reporting period

announcing, or commencing the implementation of, a major restructuring

major ordinary share transactions and potential ordinary share transactions

after the reporting period

changes in tax rates or tax laws enacted or announced after the reporting
period

commencing major litigation arising solely out of events that occurred after the
reporting period
Going Concern
▪ Financial Statements shall be prepared on a going concern basis unless such
basis is not appropriate.
▪ Entity's ability to continue as a going concern should be assessed by the entity.
▪ If there are any material uncertainties that raise doubts over the entity's ability
to continue as a going concern then the financial statements may be prepared
under a going concern assumption (if it is still valid), however, the material
uncertainties and their potential impact on the entity's ability to continue as a
going concern should be disclosed.
▪ If an entity concludes that going concern assumption is not valid then
▪ Disclose the fact that the Financial Statements have not been prepared on a going concern
basis
▪ Disclose the reasons why the entity has not been regarded as a going concern
▪ Disclose the basis on which the Financial Statements have been prepared.
 An entity shall not prepare its financial statements on a going concern
basis if management determines after the reporting period either that it
intends to liquidate the entity or to cease trading, or that it has no
realistic alternative but to do so.

31st Ashadh 2080

Is the entity a going concern ? A huge fire occurred bringing a huge Date of
(This condition is present at loss. The entity concludes that it cannot authorization for
the reporting date) continue its operations. issue

This event (fire) provides evidence

of:
ADJUSTING EVENT
For going concern
Condition (going concern) that existed
at the reporting date.

NON-ADJUSTING EVENT
For loss due to fire
Dividend
▪ If an entity declares dividends to holders of equity instruments after the reporting
period, the entity shall not recognise those dividends as a liability at the end of the
reporting period.
▪ If dividends are declared after the reporting period but before the financial statements
are authorised for issue, the dividends are not recognised as a liability at the end of
the reporting period because no obligation exists at that time. Such dividends are
disclosed in the notes in accordance with NAS 1 Presentation of Financial Statements.