Adjusting event after the reporting date

Adjusting event after the reporting date – IAS 10 Definition: Those events, both favourable and unfavourable, that occur between the reporting date and the date when the financial statements are authorised for issue. Two types of events can be identified:

  1. Those that provide evidence of conditions that existed at the reporting date (adjusting events after the reporting date); and
  2. Those that are indicative of conditions that arose after the reporting date (non-adjusting events after the reporting date).

After the reporting date, but before the financial statements have been authorised for issue, additional information was obtained by the entity for determining the amounts relating to conditions that existed at period end requiring adjustment of the amount reported at the reporting date.

Straight-forward examples:

  • The sale of inventory after the reporting date which gives evidence about its net realisable value at the reporting date,
  • The discovery of fraud or errors showing that the financial statements at the reporting date are incorrect,
  • Amounts receivable as at the reporting date received after the reporting date in respect of insurance claims (i.e. the insured event occurred on or before reporting date),
  • The settlement litigation at an amount different from the provision recorded at the reporting date. Adjusting event after the reporting date
  • Settlements after reporting date of court cases that confirm the entity had a present obligation at reporting date;
  • Receipt of information after reporting date indicating that an asset was impaired at reporting date; Adjusting event after the reporting date
  • Bankruptcy of a customer that occurs after reporting date that confirms a loss existed at reporting date Adjusting event after the reporting date
    on trade receivables;

Going concern

Events occurring after the reporting date may indicate that the whole or part of the business of the entity ceases to be a going concern. A deterioration in operating results and financial position after the reporting date may indicate a need to consider whether it is proper to use the going concern assumption in the preparation of the financial statements at the reporting date. Also, it might be necessary to at least disclose uncertainties regarding the appropriateness of applying the going concern assumption and why the entity’s management still applies the going concern assumption.

If the entity determines after the reporting period but before the financial statements are authorized for issuance that it intends to liquidate or cease engaging in trade, or that it has no realistic alternative other than to do so, the financial statements should not be prepared on a going concern basis.

Reissuance of financial statements

Reissuance of financial statements is not specifically addressed. The only date that is recognized as the date through which events after the reporting date are evaluated is the date at which the financial statements are authorized for issuance (even if the financial statements are being reissued).

Refinancing of short-term loans

Short-term loans refinanced after the reporting period may not be classified as long-term. Adjusting event after the reporting date

Presentation and disclosure

An entity shall present and disclose information that enables users of the financial statements to evaluate the effects of events after reporting period:

In the Notes to the financial statement:
  1. An entity shall disclose the date when the financial statements were authorised for issue and who gave that authorisation. If the entity’s owners or others have the power to amend the financial statements after issue, the entity shall disclose that fact. Adjusting event after the reporting date
  2. 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 additional information. Adjusting event after the reporting date
  3. 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.
  4. 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:
    1. the nature of the event; and
    2. an estimate of its financial effect, or a statement that such an estimate cannot be made.

Adjusting event after the reporting date

Adjusting event after the reporting date

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