Chapter 21 - Events After The Reporting Period

CHAPTER – 21 - IAS 10 Events after the reporting period
Events after the reporting period which provide additional evidence of conditions existing at the reporting date will cause adjustments to
be made to the assets and liabilities in the financial statements.
IAS 10 deals with events after the reporting date which may affect the position at the reporting date.
Definitions
Between the reporting date and the date the financial statements are authorised (ie for issue outside the organisation), events may occur
which show that assets and liabilities at the reporting date should be adjusted, or that disclosure of such events should be given.
Events after the reporting period: An event which could be favourable or unfavourable, that occurs between the reporting period and
the date that the financial statements are authorised for issue. (IAS 10)
Adjusting event: An event after the reporting period that provides further evidence of conditions that existed at the reporting period. (IAS
10)
Events requiring adjustment

Events that provide further evidence of conditions that existed at the reporting date should be adjusted for in the financial statements.
The standard requires adjustment of assets and liabilities in certain circumstances: 'An entity shall adjust the amounts recognised in its
financial statements to reflect adjusting events after the reporting period.'
(IAS 10)
An example of additional evidence which becomes available after the reporting date is where a customer goes bankrupt, thus confirming
that the trade account receivable balance at the year end is uncollectable.
Other examples of adjusting events are:

 Evidence of a permanent diminution in property value prior to the year end
 Evidence of a permanent diminution in the value of a long-term investment prior to the year end
 Amounts received or paid in respect of legal or insurance claims which were in negotiation at the year end
 Determination after the year end of the sale or purchase price of assets sold or purchased before the year end
 Sale of inventory after the end of the reporting period for less than its carrying value at the year end
 Insolvency of a customer with a balance owing at the year end
 Discovery of fraud or errors that show that the financial statements are incorrect
Events not requiring adjustment

Events which do not affect the situation at the reporting date should not be adjusted for, but should be disclosed in the financial statements.
Non-adjusting event: An event after the reporting period that is indicative of a condition that arose after the end of the reporting period.
The example given by the standard of such an event is where the value of an investment falls between the reporting date and the date
the financial statements are authorised for issue.
Other examples of non-adjusting events include the following.

 Announcement or commencing implementation of a major restructuring
 Announcement of a plan to discontinue an operation
 Litigation commenced after the end of the reporting period
 Share transactions after the end of the reporting period
 Acquisition, or disposal, of a subsidiary after the year end
 Major purchases and disposals of assets
 Destruction of a production plant by fire after the end of the reporting period
But note that, while they may be non-adjusting, events that are material should be disclosed in the notes to the financial statements.
Dividends
Dividends proposed or declared after the end of the reporting period are not recognised as a liability in the accounts at the reporting date,
but are disclosed in the notes to the accounts.
Disclosures
The following disclosure requirements are given for material events which occur after the reporting period which do not require
adjustment. If disclosure of events occurring after the reporting period is required by this standard, the following information should be
provided.
(a) The nature of the event
(b) An estimate of the financial effect, or a statement that such an estimate cannot be made
QUESTION
State whether the following events occurring after the reporting period require an adjustment to the assets and liabilities of the financial
statements.
(a) Purchase of an investment
(b) A change in the rate of tax, applicable to the previous year
(c) An increase in pension benefits
(d) Losses due to fire
(e) An irrecoverable debt suddenly being paid
(f) The receipt of proceeds of sales or other evidence concerning the net realisable value of inventory
(g) A sudden decline in the value of property held as a long-term asset
ANSWER
(b), (e) and (f) require adjustment.
Of the other items, (a) would not need to be disclosed at all.

Item (c) could need a disclosure if the cost to the company is likely to be material.
Item (d) again would be disclosed if material, as would (g) if material.
Assuming that item (d) is material, it would be disclosed by way of the following note to the accounts.
(The company year end is 31 December 20X8.)
Events after the reporting period

On 22 January 20X9, there was a fire at the company's warehouse. As a result, inventories costing a total of $250,000 were destroyed.
These inventories are included in assets at the reporting date.
CHAPTER ROUNDUP
 Events after the reporting period which provide additional evidence of conditions existing at the reporting date
will cause adjustments to be made to the assets and liabilities in the financial statements.
 Events that provide further evidence of conditions that existed at the reporting date should be adjusted for in
the financial statements.
 Events which do not affect the situation at the reporting date should not be adjusted for, but should be disclosed in
the financial statements.
1) When does an event after the reporting period require changes to the financial statements?
Assets and liabilities should be adjusted for events after the reporting period when these provide additional evidence for
estimates existing at the reporting date.
2) What disclosure is required when it is not possible to estimate the financial effect of an event not requiring adjustment?
A No disclosure
B A note to the accounts giving what information is available
B / A statement of the nature of the event and the fact that a financial estimate of the event cannot be made

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CHAPTER – 21 - IAS 10 Events after the reporting period

Events requiring adjustment

Other examples of adjusting events are:

Events not requiring adjustment

Other examples of non-adjusting events include the following.

Of the other items, (a) would not need to be disclosed at all.

Events after the reporting period

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