Sri Lanka Accounting Standard – LKAS 10

Events after the Reporting Period

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CONTENTS
paragraphs
SRI LANKA ACCOUNTING STANDARD – LKAS 10
EVENTS AFTER THE REPORTING PERIOD
OBJECTIVE 1
SCOPE 2
DEFINITIONS 3
RECOGNITION AND MEASUREMENT 8
Adjusting events after the reporting period 8
Non-adjusting events after the reporting period 10
Dividends 12
GOING CONCERN 14
DISCLOSURE 17
Date of authorisation for issue 17
Updating disclosure about conditions at the end of the
reporting period 19
Non-adjusting events after the reporting period 21
EFFECTIVE DATE 23

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Sri Lanka Accounting Standard – LKAS 10

Events after the Reporting Period
Sri Lanka Accounting Standard LKAS 10 Events after the Reporting Period is
set out in paragraphs 1–23B. All the paragraphs have equal authority. LKAS 10
should be read in the context of its objective, the Preface to Sri Lanka
Accounting Standards and the Conceptual Framework for Financial Reporting.
LKAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
provides a basis for selecting and applying accounting policies in the absence of
explicit guidance.

Objective
1 The objective of this Standard is to prescribe:

(a) when an entity should adjust its financial statements for events
after the reporting period; and

(b) the disclosures that an entity should give about the date when the
financial statements were authorised for issue and about events
after the reporting period.

The Standard also requires that an entity should not prepare its financial
statements on a going concern basis if events after the reporting period
indicate that the going concern assumption is not appropriate.

Scope
2 This Standard shall be applied in the accounting for, and disclosure
of, events after the reporting period.

Definitions
3 The following terms are used in this Standard with the meanings
specified:

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:

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(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).

4 The process involved in authorising the financial statements for issue

will vary depending upon the management structure, statutory
requirements and procedures followed in preparing and finalising the
financial statements.

5 In some cases, an entity is required to submit its financial statements to

its shareholders for approval after the financial statements have been
issued. In such cases, the financial statements are authorised for issue
on the date of issue, not the date when shareholders approve the
financial statements.

Example

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
authorises 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.

The financial statements are authorised for issue on 18 March 20X2

(date of board authorisation for issue).

6 In some cases, the management of an entity is required to issue its

financial statements to a supervisory board (made up solely of non-
executives) for approval. In such cases, the financial statements are
authorised for issue when the management authorises them for issue to
the supervisory board.

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Example

On 18 March 20X2, the management of an entity authorises 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.

The financial statements are authorised for issue on 18 March 20X2

(date of management authorisation for issue to the supervisory board).

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

Recognition and measurement

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

9 The following are examples of adjusting events after the reporting

period that require an entity to adjust the amounts recognised in its
financial statements, or to recognise items that were not previously
recognised:

(a) 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. The entity adjusts any previously recognised
provision related to this court case in accordance with LKAS 37
Provisions, Contingent Liabilities and Contingent Assets or
recognises a new provision. The entity does not merely disclose a
contingent liability because the settlement provides additional
evidence that would be considered in accordance with paragraph
16 of LKAS 37.

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(b) the receipt of information after the reporting period indicating that
an asset was impaired at the end of the reporting period, or that
the amount of a previously recognised impairment loss for that
asset needs to be adjusted. For example:

(i) 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; and

(ii) the sale of inventories after the reporting period may give
evidence about their net realisable value at the end of the
reporting period.

(c) the determination after the reporting period of the cost of assets
purchased, or the proceeds from assets 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 as a result of events before that date (see
LKAS 19 Employee Benefits).

(e) the discovery of fraud or errors that show that the financial
statements are incorrect.

Non-adjusting events after the reporting period

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

11 An example of a non-adjusting event after the reporting period is a

decline in fair value of investments between the end of the reporting
period and the date when the financial statements are authorised for
issue. The decline in fair value does not normally relate to the condition
of the investments at the end of the reporting period, but reflects
circumstances that have arisen subsequently. Therefore, an entity does
not adjust the amounts recognised in its financial statements for the
investments. Similarly, the entity does not update the amounts disclosed
for the investments as at the end of the reporting period, although it may
need to give additional disclosure under paragraph 21.

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Dividends
12 If an entity declares dividends to holders of equity instruments (as
defined in LKAS 32 Financial Instruments: Presentation) after the
reporting period, the entity shall not recognise those dividends as a
liability at the end of the reporting period.

13 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 LKAS 1 Presentation of Financial Statements.

Going concern
14 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.

15 Deterioration in operating results and financial position after the

reporting period may indicate a need to consider whether the going
concern assumption is still appropriate. If the going concern assumption
is no longer appropriate, the effect is so pervasive that this Standard
requires a fundamental change in the basis of accounting, rather than an
adjustment to the amounts recognised within the original basis of
accounting.

16 LKAS 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 reporting period.

Disclosure
Date of authorisation for issue
17 An entity shall disclose the date when the financial statements were
authorised for issue and who gave that authorisation. If the entity’s

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owners or others have the power to amend the financial statements

after issue, the entity shall disclose that fact.

18 It is important for users to know when the financial statements were

authorised for issue, because the financial statements do not reflect
events after this date.

Updating disclosure about conditions at the end of

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

20 In some cases, an entity needs to update the disclosures in its financial

statements to reflect information received after the reporting period,
even when the information does not affect the amounts that it
recognises in its financial statements. One example of the need to
update disclosures is when evidence becomes available after the
reporting period about a contingent liability that existed at the end of the
reporting period. In addition to considering whether it should recognise
or change a provision under LKAS 37, an entity updates its disclosures
about the contingent liability in the light of that evidence.

Non-adjusting events after the reporting period

21 If non-adjusting events after the reporting period are material,
non-disclosure could influence the economic decisions that users
make on the basis of the financial statements. Accordingly, an
entity shall disclose the following for each material category of non-
adjusting event after 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.

22 The following are examples of non-adjusting events after the reporting

period that would generally result in disclosure:

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(a) a major business combination after the reporting period (SLFRS 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 SLFRS 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

reporting period;

(e) announcing, or commencing the implementation of, a major

restructuring (see LKAS 37);

(f) major ordinary share transactions and potential ordinary share

transactions after the reporting period (LKAS 33 Earnings per
Share requires an entity to disclose a description of such
transactions, other than when such transactions involve
capitalisation or bonus issues, share splits or reverse share splits
all of which are required to be adjusted under LKAS 33);

(g) abnormally large changes after the reporting period in asset prices
or foreign exchange rates;

(h) changes in tax rates or tax laws enacted or announced after the
reporting period that have a significant effect on current and
deferred tax assets and liabilities (see LKAS 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 reporting period.

Effective date
23 An entity shall apply this Standard for annual periods beginning on or
after 1 January 2012. Earlier application is encouraged. If an entity
applies this Standard for a period beginning before 1 January 2012, it
shall disclose that fact.

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23A SLFRS 13 Fair Value Measurement, issued in April 2013, amended

paragraph 11. An entity shall apply that amendment when it applies
SLFRS 13.

23B SLFRS 9 Financial Instruments, as issued in December 2014, amended

paragraph 9. An entity shall apply that amendment when it applies
SLFRS 9.

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