IAS 10 : Events after the reporting period

IAS 10 : Events after the reporting period

1. IAS 10
Events After the Reporting Period
Prepared by
Amit Sarkar
CFO 4
th
Batch
Email: [email protected]
IAS 10

2. Focus is here!
Beginning of End of FS authorized
reportingperiod reporting period for issue
❖Meaning of ‘authorized for issue’
IAS 10 Event after the reporting periodis favorable or unfavorable event
that occurs between :
☞The end of the reporting period and
☞The date that the financial statements are authorized for issue.

3. ❖There are two types of event:
1. Adjusting events
2. Non-adjusting events
Financial statements are prepared on the basis of conditions
existing at the reporting date.
IAS 10

4. Adjusting events
Adjusting eventis the event that arose after the end of the
reporting period, but provides further evidence of
conditions that existed at the end of the
reporting period.
Accounting treatment:financial statements
should be adjusted for adjusting events.
IAS 10

5. • the sale of inventory after the reporting date which gives
evidence about its net realizable value at the reporting date
• The bankruptcy of a customer after the reporting date that
confirms that an allowance is required against an outstanding
balance at the reporting date
• The discovery of fraud or errors that show that the financial
statements are incorrect
• the settlements after the reporting period of a court case that
confirms that the entity had a present obligation at the reporting
date. This would require a provision to be recognized in the
financial statements (or an existing provision to be adjusted).
Examples
IAS 10

6. Non-adjusting event
Non-adjusting eventis an event after the reporting period that
indicates conditions arising after the end of the reporting period.
Accounting treatment:do not adjust financial statements
for non-adjusting events. The following disclosure shall be
made:
☞The nature of the event, and
☞An estimate of its financial effect or a statement that
such an estimate cannot be made.
IAS 10

7. Examples
• a major business combination after the reporting date or the
disposal of a major subsidiary
• Announcing a plan to discontinue an
operation
• Major purchases and disposals of assets
• Destruction of a major production plant by
a fire after the reporting date
• Announcing or commencing a major restructuring
• Abnormally large changes after the reporting date in assets prices
or foreign exchanges rates
IAS 10

8. GOING CONCERN
Entity shall not prepare financial statementson going concern basis if
management determines after the reporting period :-
☞to liquidate the entity, or
☞to cease trading, or
☞that there is no realistic alternative but to do so
IAS 10
Problem
Rudro has a trade debtor that owes 15 million on 30 June 2019. On 21 July 2019, the
debtor goes into liquidation. Rudro is informed that it will receive nothing from the
liquidation. Rudro is unable to raise funds to recover from this loss, and is certain to be
liquidated.
How shall this situation be reflected in the financial statements for the year ended 30
June 2019 ?
Solution
The financial statements to 30 June 2019 should be produced on a liquidation basis, not a
going-concern basis.

9. DIVIDENDS
If an entity declares dividends to shareholders after the end of the
reporting period, the entity shall not account for those dividends as
for a liability at the reporting date.
If dividends are declared after the end of the Reporting Period, but
before the financial statements are approved for issue, the
dividends are disclosed in the notes to the financial statements.
IAS 10
Problem:
KLM has prepared its financial statements for the year ended 31 December 20X1.
On 30 January 20X2, KLM’s directors declare dividends amounting to CU 2 million.
How shall this transaction be reported in the financial statements for the year
ended 31 December 20X1?
Solution:
This is a non-adjusting event. KLM does not change the figures in its financial
statements for the year 20X1, but discloses the post-reporting-period dividends in
the note on retained earnings.

10. DISCLOSURE
Non-adjusting events do not effect any items in the statements of financial
position or comprehensive income. However , if the events are material, then
they must be disclose , otherwise the financial statements could be misleading.
The Following should be disclosed for material non-adjusting events:
☞the nature of the event
☞an estimate of the financial effects, or a statements that an estimate
cannot be made.
Equity dividends declared or proposed after the year-end are not a liability at
the year end(because no obligation to pay a dividend exists at that time). They
should be disclosed in a note to the financial statements, This is a non-adjusting
event.
IAS 10

11. IAS 10