IAS 10
Events after the Reporting Period
1Objective and scope
IAS 10 prescribes when an entity should adjust its financial statements for events after the reporting period, and the disclosures it should give about the date the financial statements were authorised for issue and about events after the reporting period.
2Key definitions
3Classifying events
| Adjusting (recognise / update) | Non-adjusting (disclose only, if material) |
|---|---|
| Court case settled after year end, confirming a present obligation that existed at the reporting date | A decline in the market value of investments after the reporting date |
| Customer's bankruptcy after year end, confirming a receivable was already impaired at the reporting date | Announcement of a plan to discontinue an operation, or a major business combination |
| Sale of inventory after year end at a price that provides evidence of its net realisable value at the reporting date | A major purchase or disposal of assets, or expropriation of assets by government |
| Discovery of fraud or errors showing the financial statements were incorrect | Destruction of a major production plant by fire after the reporting date |
Dividends declared after the reporting period, but before the financial statements are authorised for issue, are not recognised as a liability at the reporting date, because no obligation existed at that date; they are disclosed as a non-adjusting event.
Going concern is treated specially
If management determines after the reporting date that it intends to liquidate the entity or cease trading, or has no realistic alternative but to do so, the financial statements are not prepared on a going concern basis at all - this is not simply an adjusting event, it changes the whole basis of preparation.
4Presentation and disclosure
- The date the financial statements were authorised for issue, and who gave that authorisation
- If the owners or others have the power to amend the financial statements after issue, that fact
- For each material category of non-adjusting event: its nature, and an estimate of its financial effect (or a statement that such an estimate cannot be made)
5Examinable focus
What KASNEB tests
A scenario question listing five or six events after year end and asking the candidate to classify each as adjusting or non-adjusting, with the required accounting treatment, is a recurring exam format. The test to apply every time: did the condition exist at the reporting date (adjusting), or did it only arise afterwards (non-adjusting)?