Prescribes when an entity should adjust its financial statements for events that occur after the reporting period.
Clarifies the disclosures required about the date the financial statements were authorized for issue and about events after the reporting period.
Events After the Reporting Period:
Those events, both favorable and unfavorable, that occur between the end of the reporting period (e.g., Dec 31st) and the date when the financial statements are authorized for issue.
The date of authorization is crucial as it defines the cutoff point for considering events.
Two Types of Events:
IAS 10 distinguishes between events requiring adjustment and those requiring only disclosure.
| Type | Description | Accounting Treatment |
| Adjusting Events |
Provide evidence of conditions that existed at the end of the reporting period. |
Adjust the amounts recognized in the financial statements (or recognize items not previously recognized). |
| Non-Adjusting Events |
Are indicative of conditions that arose after the end of the reporting period. |
Do not adjust amounts recognized. Disclose if material (nature and financial estimate). |
Adjusting events provide additional evidence about conditions existing at the reporting date, requiring updates to amounts recognized.
Examples of Adjusting Events:
Settlement after the reporting period of a court case that confirms the entity had a present obligation at the end of the reporting period (adjust provision under IAS 37).
Receipt of information after the reporting period indicating that an asset was impaired at the end of the reporting period (e.g., bankruptcy of a major customer confirms loss on a receivable).
The sale of inventories after the reporting period may give evidence about their net realizable value (NRV) at the reporting date (if sold for less than cost).
Determination after the reporting period of the cost of assets purchased, or the proceeds from assets sold, before the end of the reporting period.
Determination after the reporting period of the amount of profit-sharing or bonus payments, if the entity had a present legal or constructive obligation at the end of the reporting period to make such payments.
Discovery of fraud or errors that show the financial statements were incorrect.
Treatment:
Adjust the amounts (assets, liabilities, income, expense) recognized in the financial statements to reflect the new information.
Update related disclosures that reflect the adjusted amounts and the conditions at the reporting date.
Non-adjusting events relate to conditions that arose *after* the reporting date and do not affect the amounts recognized in the financial statements.
However, if they are material, non-disclosure could influence users' economic decisions. Therefore, disclosure is required.
Examples of Non-Adjusting Events:
A major decline in the fair value of investments between the reporting date and authorization date (reflects market conditions *after* year-end).
Acquisition or disposal of a major subsidiary (business combination / disposal) after the reporting period.
Destruction of a major production plant by a fire or flood after the reporting period.
Announcing a plan to discontinue an operation.
Major purchases or disposals of assets.
Entering into significant commitments or contingent liabilities (e.g., major guarantees).
Major ordinary share transactions (or potential share transactions) after the reporting period.
Commencing major litigation arising solely out of events that occurred after the reporting period.
Announcing or paying dividends (see below).
Disclosure Requirements (for material non-adjusting events):
An estimate of its financial effect, or a statement that such an estimate cannot be made reliably.
Declaration After Reporting Date:
If an entity declares dividends to holders of equity instruments after the reporting period, the entity shall not recognize those dividends as a liability at the end of the reporting period.
This is because no obligation exists at the reporting date; the obligation arises only when declared.
Such dividends are disclosed in the notes in accordance with IAS 1 *Presentation of Financial Statements*.
Post-Reporting Period Events Affecting Going Concern:
An entity shall not prepare its financial statements on a going concern basis if management determines after the reporting period either that it intends to liquidate the entity or to cease trading, or that it has no realistic alternative but to do so.
Deterioration in operating results and financial position after the reporting period may indicate a need to consider whether the going concern assumption is still appropriate.
If the going concern assumption is no longer appropriate due to post-reporting period events, IAS 1 requires a fundamental change in the basis of accounting (not just an adjustment under IAS 10).
IAS 1 requires disclosure if financial statements are not prepared on a going concern basis, including the basis used and the reason why.
Definition and Importance:
The date when the financial statements are considered complete and management takes responsibility for them. This marks the end of the period during which events are assessed under IAS 10.
The process varies depending on management structure, statutory requirements, etc. It could be the date the board approves them, or an earlier management authorization date if board approval is only a ratification.
Disclosure Required:
The entity must disclose the date when the financial statements were authorized for issue.
Must disclose who gave that authorization (e.g., Board of Directors, Management).
If owners or others have the power to amend the financial statements after issue, this fact must also be disclosed.
For Material Non-Adjusting Events:
Estimate of its financial effect, or a statement that an estimate cannot be made reliably.
Potential impact on future operations, liquidity, or solvency (if significant).
If Going Concern Assumption is Affected:
Description of the material uncertainties or the fact that statements are not prepared on a going concern basis.
Basis on which the financial statements are prepared (if not going concern).
Reasons why the entity is not regarded as a going concern.
Date of Authorization:
The specific date the financial statements were authorized for issue.
Who gave the authorization (e.g., Board of Directors, Management).
Disclosure if owners/others have power to amend after issue.
