What happened in the reporting period

What happened in the reporting period

There is no requirement to disclose a summary of significant events and transactions that have affected the company’s financial position and performance during the period under review (or simply what happened in the reporting period). However, information such as this could help readers understand the entity’s performance and any changes to the entity’s financial position during the year and make it easier finding the relevant information. However, information such as this could also be provided in the (unaudited) operating and financial review rather than the (audited) notes to the financial statements.

Covid-19
At the time of writing, the biggest impact on the financial statements of entities all around the world is related to the COVID-19 pandemic. Most entities will be affected by this in one form or another and should discuss the impact prominently in their financial statements. However, as the events are still unfolding, this publication is not providing any illustrative examples or guidance. See how to account for Covid-19 to get an up-to-date discussion.

Going concern disclosures [IAS1.25]
When preparing financial statements, management shall make an assessment of an entity’s ability to continue as a going concern. Financial statements shall be prepared on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so.

When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern, those uncertainties shall be disclosed. Where the financial statements are not prepared on a going concern basis, that fact shall be disclosed, together with the basis on which the financial statements are prepared and the reason why the entity is not regarded as a going concern.

Where there are material uncertainties about the entity’s ability to continue as a going concern, this fact should be disclosed upfront, for exampleWhat happened in the reporting period in a note such as this.

A disclosure of material uncertainties about the entity’s ability to continue as a going concern should:

  1. adequately describe the principal events and conditions that give rise to the significant doubt on the entity’s ability to continue as a going concern What happened in the reporting period
  2. explain management’s plans to deal with these events or conditions, and
  3. state clearly that: What happened in the reporting period
    1. there is a material uncertainty related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern, and
    2. the entity may therefore be unable to realise its assets and discharge its liabilities in the normal course of business. [International Statements on Auditing ISA 570.19]
Something else -   Questions to Ask about the Statement of Financial Position

Example disclosure – What happened in the reporting period

The financial position and performance of the group was particularly affected by the following events and transactions during the reporting period (see overviews below): What happened in the reporting period

  • The acquisition of the Reporting entity Electronics Group in April 2020 (see note 14) which resulted in an increase in property, plant and equipment (note 8(a)) and the recognition of goodwill and other intangible assets (note 8(d)).
  • The sale of the engineering subsidiary in February 2020 (see note 15).
  • The sale of surplus land by the Reporting entity Consulting Inc (see note 4).
  • A fire in Springfield in March 2020 which resulted in the impairment of a number of assets (see note 4).
  • A review of the furniture manufacturing and wholesale operations which led to redundancies and a goodwill impairment charge (see notes 8(i) and 8(d)).

For a detailed discussion about the group’s performance and financial position please refer to our operating and financial review on pages [x] to [y].

Some of the amounts reported for the previous period have been restated to correct an error. Detailed information about these adjustments can be found in note 11(b).

[Entities may use this section to explain the impact of COVID-19 on their operations, financial position and financial performance.]

Overview of acquisition

[IFRS 3.B64(a)-(d)]

On 1 April 2020 the Reporting entity Plc acquired 70% of the issued share capital of the Reporting entity Electronics Group, a manufacturer of electronic equipment. The acquisition has significantly increased the group’s market share in this industry and complements the group’s existing IT consultancy division.

Something else -   IAS 37 Provisions - best estimate and timely recognition

Details of the purchase consideration, the net assets acquired and goodwill are as follows: [IFRS 3.B64(f)]

Purchase consideration:

CU’000

Cash paid What happened in the reporting period

3,000

Ordinary shares issued What happened in the reporting period

9,765

Contingent consideration What happened in the reporting period

135

Total purchase consideration [IAS 7.40(a)]

12,900

The fair value of the 1,698,000 shares issued as part of the consideration paid for the Reporting entity Electronics Group (CU9.765m) was based on the published share price on 1 April 2020 of CU5.78 per share. Issue costs of CU50,000 which were directly attributable to the issue of the shares have been netted against the deemed proceeds. [IFRS 3.B64(f)(iv),(m)]

The assets and liabilities recognised as a result of the acquisition are as follows:

Amounts in fair value at acquisition date What happened in the reporting period

CU’000

Net identifiable assets acquired What happened in the reporting period

16,836

Less: non-controlling interests [IFRS 3.B64(o)(i)]

-5,051

Add: Goodwill

1,115

Net assets acquired

12,900

The complete summary of acquisition is provided in note 14 Business combination.

Overview discontinued operationWhat happened in the reporting period

On 30 October 2019 the group announced its intention to exit the engineering business and initiated an active program to locate a buyer for its German subsidiary, the Reporting entity Engineering GmbH. The associated assets and liabilities were consequently presented as held for sale in the 2019 financial statements. [IFRS 5.41(a),(b),(d)]

The subsidiary was sold on 28 February 2020 with effect from 1 March 2020 and is reported in the current period as a discontinued operation. [IFRS 5.30]

Headlines performance and cash flows

[IFRS 5.33]

What happened in the reporting period What happened in the reporting period

2020

CU’000

2019

CU’000

Revenue

4,200

26,460

What happened in the reporting period

Profit from discontinued operation

727

399

What happened in the reporting period

Other comprehensive income from discontinued operations

170

58

What happened in the reporting period

Net cash inflow from operating activities

1,166

710

Net cash inflow/(outflow) from investing activities (2020 includes an inflow of CU3,110,000 from the sale of the division)

3,110

-190

Net cash (outflow) from financing activities

-280

Net increase in cash generated by the subsidiary

4,276

240

Something else -   Take 1 stop for best read - Measurement uncertainty

The complete summary of discontinued operations is provided in note 15 Discontinued operation.

Overview Sale of freehold land

Following the re-zoning of land held by the Reporting entity Consulting Inc, the entity sold a large parcel of freehold land at a significant profit What happened in the reporting periodand realised a gain of CU1,270,000 (included in the IT consulting – US segment).

Overview impairment of other assets

A fire in Springfield in March 2020 damaged a major office and warehouse building owned by a subsidiary that is part of the Oneland furniture manufacturing and wholesale segment. The fire also destroyed equipment and inventories stored in the warehouse.

The office and warehouse building was written down to its recoverable amount of CU1,220,000, which was determined by reference to the building’s fair value less costs of disposal. The main valuation inputs used were a market value of CU105 per square metre (determined by an independent valuer) and costs of repair, estimated by management to be approximately CU430,000.

Since the estimated costs of repair are a significant unobservable input, the fair value of the office and warehouse building is classified as a level 3 fair value. The total impairment of other assets amounted to CU1,210,000.

The complete summary of these two items is provided in note 4 Material profit or loss items.

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Something else -   What about impairment of goodwill

What happened in the reporting period What happened in the reporting period What happened in the reporting period What happened in the reporting period What happened in the reporting period What happened in the reporting period

What happened in the reporting period

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