IAS 10 – Events after the reporting period (Subsequent Events) UFE Study Guide

Events after the reporting period (IAS 10)
Last Updated: October 17, 2012

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IAS 10 – Events after the reporting period covers events that occur after the reporting period (date of financial statements) but before the financial statements are authorised for issue (authorisation date). This is also commonly known as subsequent events.

This standard also requires that if the entity is found not to be a going concern after the reporting period then the entity should not prepare its financial statements on a going concern basis.

Financial Statements are considered authorised usually when the board of directors approves them for issue, not when they are released to shareholders.

 

When Should an Entity Adjust its Financial Statements for Subsequent Events?

Two types of events can be identified.

1. Those that provide evidence of conditions that existed at the end of the reporting period. These are adjusting events and require the financial statements to be adjusted.

• Settlement of court cases that confirms an obligation
• Receipt of information regarding the impairment of an asset
• Bankruptcy of a customer that occurs after the reporting period (A/R)
• Sale of inventory after reporting period provides info on NRV
• The determination of profit sharing or bonus program amounts
• Fraud or error in the financial statements discovered

 

2. Those that provide information about conditions that arise after the reporting period. These are non-adjusting events and you may not adjust the financial statements.

• Change in fair value of investments that occur after the reporting date
• Dividends that the entity has declared after the reporting date are not a liability on the reporting date

 

Disclosures Necessary

• Date that the financial statements are authorised for issue
• Updates about conditions at the end of the reporting period
• For non-adjusting events, when material:
  • The nature of the event
  • An estimate of the financial effect (or a statement that an estimate cannot be made)