IAS 10 | Events after the Reporting Period

1

Objective

The objective of the standard is to prescribe when an entity should adjust its financial statements for events after the reporting period and the disclosures required regarding the date of authorisation and subsequent events. It also establishes that financial statements should not be prepared on a going concern basis if events after the reporting period indicate this assumption is inappropriate.

2

Scope

This standard applies to the accounting for, and disclosure of, events after the reporting period.

3

Definitions

Events after the reporting period are those, both favourable and unfavourable, that occur between the end of the reporting period and the date the financial statements are authorised for issue. Two types are identified: (a) adjusting events, which provide evidence of conditions existing at the end of the reporting period; and (b) non-adjusting events, which indicate conditions arising after the reporting period.

4

Authorisation Process

The process of authorising financial statements varies based on management structure and statutory requirements.

5

Shareholder Approval

If an entity must submit financial statements to shareholders for approval after issue, the authorisation date is the date of issue, not the date of shareholder approval.

6

Supervisory Board

If management must issue financial statements to a supervisory board (comprising non-executives) for approval, the authorisation date is when management authorises them for issue to that supervisory board.

7

Event Window

Events after the reporting period encompass all events up to the date the financial statements are authorised for issue, even if they occur after the public announcement of profit or other financial information.

8

Adjusting Events Principle

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

9

Adjusting Examples

Examples requiring adjustment include: (a) settlement of a court case confirming a present obligation; (b) information indicating asset impairment at the reporting date (e.g., customer bankruptcy or sale of inventory); (c) determination of the cost of assets purchased or proceeds from assets sold before the reporting date; (d) determination of profit-sharing or bonus payments if a present obligation existed; and (e) discovery of fraud or errors showing the statements were incorrect.

10

Non-Adjusting Principle

An entity shall not adjust the amounts recognised in its financial statements to reflect non-adjusting events after the reporting period.

11

Non-Adjusting Examples

An example is a decline in the fair value of investments between the reporting date and the authorisation date. This reflects circumstances arising subsequently, not the condition of the investment at the reporting date, so no adjustment is made, though disclosure may be required.

12

Dividends

If dividends are declared to equity holders after the reporting period, the entity shall not recognise them as a liability at the end of the reporting period.

13

Dividend Obligation

Dividends declared after the reporting period but before authorisation do not meet the criteria for a present obligation at the reporting date. Such dividends are disclosed in the notes in accordance with IFRS 18.

14

Going Concern Basis

An entity shall not prepare financial statements on a going concern basis if management determines after the reporting period that it intends to liquidate the entity, cease trading, or has no realistic alternative but to do so.

15

Pervasive Effect

Deterioration in operating results after the reporting period may necessitate a review of the going concern assumption. If the assumption is no longer appropriate, the effect is so pervasive that a fundamental change in the basis of accounting is required rather than a simple adjustment.

16

Going Concern Disclosure

IAS 8 specifies disclosures required if financial statements are not prepared on a going concern basis or if management is aware of material uncertainties regarding the entity's ability to continue as a going concern, which may arise from events after the reporting period.

17

Authorisation Date Disclosure

An entity must disclose the date the financial statements were authorised for issue and who gave that authorisation. If owners or others have the power to amend statements after issue, this fact must be disclosed.

18

Importance of Date

Disclosure of the authorisation date is crucial for users to understand that the financial statements do not reflect events occurring after this date.

19

Updating Disclosures

If an entity receives information after the reporting period about conditions that existed at the reporting date, it must update disclosures relating to those conditions.

20

Updating Example

Even if amounts recognised are not affected, disclosures may need updating. For example, new evidence regarding a contingent liability existing at the reporting date requires updated disclosures in addition to considering provision recognition under IAS 37.

21

Non-Adjusting Disclosure

If non-adjusting events are material, non-disclosure could influence user decisions. For each material category of non-adjusting event, the entity must disclose the nature of the event and an estimate of its financial effect (or a statement that such an estimate cannot be made).

22

Non-Adjusting Examples List

Examples requiring disclosure include: major business combinations or disposals; discontinuing operations; major asset purchases or expropriations; destruction of a major plant by fire; major restructurings; major share transactions; abnormal changes in asset prices or forex rates; changes in tax rates/laws; significant commitments/guarantees; and major litigation arising solely from events after the reporting period.

23

Effective Date

The standard applies for annual periods beginning on or after 1 January 2005, with earlier application encouraged.

24

Withdrawal

This standard supersedes the previous version, IAS 10 Events After the Balance Sheet Date (revised in 1999).