3/21/2017 IAS10EventsaftertheReportingPeriod(detailedreview)

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IAS10EventsaftertheReportingPeriod(detailed OBURAPGuide

review)
Thursday,January23,2014 Print Email 0
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Objective

Aspartofthebusinessworld,itisnormalthatsomeeventsmaytakeplaceafterthereportingperiod,but
beforethedateofauthorizationoffinancialstatementsforissue,andwhichmightreflectsome
informationthatneedstobeconsideredbeforethefinancialstatementsareauthorizedforissue.

ThisStandardprovidesguidancefortheaccountingtreatmentoftheevents,whichtakeplaceafterthe RSSArticles
reportingperiod,butbeforethedateofauthorizationoffinancialstatementsforissue,relateddisclosure
requirements,andinwhatcircumstances:
(a)Theentitywilladjustitsfinancialstatementsbeforeissuance,and
(b)Whenonlydisclosuresarerequiredfortheseevents LastAccounting
News
Scope
M&ADealActivityReached
TherequirementsofthisstandardareapplicabletoaccountforEventsafterReportingPeriodand
itshighestpointSince2008
relateddisclosures.

Definitions RecentACCAReportonthe
IncreasingscopeofShared
EventsaftertheReportingPeriod:
Services
Theeventswhichtakeplaceafterthereportingdatebutbeforethedateofauthorizationoffinancial
statementsforissuearecalledeventsafterreportingperiod.Thesemaybefavorableorunfavorable.
MicrobusinessesOpinion
Theseareclassifiedintotwocategoriesas:
withRegardstoMakingTax
DigitalProposal
AdjustingEvents

NonadjustingEvents AccountantscanPlayan
AdjustingEvents:
ImportantRoleinReducing
Thosewhichtakeplaceafterthereportingdatebutbeforethedateofauthorizationoffinancial
Corruption
statementsforissue,andprovideadditional/furtherevidencerelatedtotheconditionswhichexistedat
reportingdate. AATHasBeenApprovedas
anApprenticeAssessment
NonadjustingEvents: Organization
Thosewhichtakeplaceafterthereportingdatebutbeforethedateofauthorizationoffinancial
statementsforissue,andareindicativeoftheconditionswhicharoseafterthereportingdate. IPSAS40,NewPublic
SectorAccountingStandard
Recognition&Measurement IssuedbytheIPSASB

1.AdjustingEvents: IAASBReleasesitsTwo
yearWorkPlantoEnhance
Theentityisrequiredtoaccountfortheadjustingeventsbyadjustingtheirpotentialfinancialimpacts AuditQuality
infinancialstatementsbeforethesearefinalizedandissued.

Allaccountingnews
ApplicationExamples:

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3/21/2017 IAS10EventsaftertheReportingPeriod(detailedreview)

Followingaretheexamplesofadjustingevents,forwhichentityisrequiredtoadjustitsfinancial
statementsbeforeissuance: Have10minutestorelax?

Playourunique
Thereceiptofinformationregardingthebankruptcyofacustomerafterthereportingdate,which
Balancegame
wasstatedasreceivableatyearend,providesevidencethatthedebthasbecomeirrecoverable
andtheentityshouldadjustthevalueofreceivablereportedinstatementoffinancialposition. PlayTheGame

ReductioninNetrealizableValueofInventoryafterthereportingdate,statedatcostatyear
end,indicatedfromthesaleofinventoryatlowsellingpriceafterthereportingdate,provides
evidencethatthevalueofinventoryhasfallendownandentityneedstoadjustthevalueof
inventoryincludedinstatementoffinancialposition.

Thereceiptofinformationafterthereportingdate,confirmingthattheassetisimpairedexistedat
thereportingdate.

Thedeterminationofpurchase/sellingpriceofanassetafterthereportingdate,boughtorsold
duringthecurrentyear.

Thesettlementofacourtcaseafterthereportingdate,whichwasinitiatedduringthecurrentyear,
willprovidesevidencethatentityhasanobligationatyearendtherefore,entityshouldadjustthe
financialstatementsaccordingly.

Theidentificationofafraud,oranyerrorafterthereportingdate.

2.NonadjustingEvents:

Inrespectofnonadjustingevents,noadjustmentisrequiredinfinancialstatementsinsteadIAS10
requiressucheventstobedisclosedinthenotestoaccountsiftheseareconsideredtobematerial,
otherwisethesewillbeignored.

ApplicationExamples:

(a)Anylosswhicharisesafterthereportingdatebecauseofnaturaldisasterssuchasfireorflood.
(b)Anysaleorpurchaseofassetafterthereportingdate.
(c)Saleordiscontinuationofabusinesslineafterthereportingdate.
(d)Fallinvalueofinvestmentafterthereportingdate.
(e)Dividenddeclaredafterthereportingdate
(f)Anybusinessacquisitionafterthereportingdate.
(g)Thecommencementofacourtcaseduetotheeventswhichtakeplaceafterthereportingdate.
(i)Anychangesinthetaxrates/lawsafterthereportingdate,applicabletopreviousyear

Note:
Ifaneventtakesplaceafterthedateofauthorizationoffinancialstatements,itwillbeneitheradjusting
nornonadjustinginsteaditwillbeoutsidethescopeofIAS10.

GoingConcern

IAS10requires,ifaneventoccursafterthereportingdatebutbeforethedateofauthorizationof
financialstatementsforissueanditmaterially/severallyaffectsthegoingconcernstatusoftheentity
thesucheventwillalwaysbetreatedasadjustingeventirrespectiveofthedefinitionitsatisfy.
Forsuchevent,theentitywillprepareitsfinancialstatementsonbreakupbasis.

Disclosures

IAS10requirestheentitytodisclosethefollowing:

Thedateofauthorizationoffinancialstatementsandrelatedauthority.

ForNonadjustingeventstheentityshoulddisclose

Thenatureofsucheventand

Itsfinancialimpact

WorkedExample:

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3/21/2017 IAS10EventsaftertheReportingPeriod(detailedreview)

ABLtdengagedinmanufacturingfacilityandhasyearendof31December2012.Itsdateof
authorizationoffinancialstatementsforissuewas10February2013andtheannualgeneralmeetingis
scheduledon7March2013.Thefollowingeventsoccurredasfollows:

(a)Thecompany'smajorwarehouseandtheinventoryitcontained,wascompletelydamagedbecause
ofafireexplosiontookplaceon12January2013.Thewarehouseandtheinventoryweretohavea
carryingvalue$20millionand$12millionrespectivelyonthisdate.
Thecompanyisexpectedtorecoveruptomaximumof$18millionasithasnotupdateditsinsurance
cover.Theoperationsoftheentitywereseverallyinterruptedandtheentityexpectstofacelossesfor
comingfewyears.

(b)AparticulartypeofinventoryheldbyABLtdatadifferentlocationwasrecordedatitscostof
$920,000at31December2012inthestatementoffinancialposition.Theentitysold70%ofthis
inventoryfor$560,000on15January2013,incurringacommissionexpenseof15%ofthesellingprice
oftheinventory.

(iii)Thegovernmentintroducedtaxchangeson13March2013,duetowhichthetaxliabilityrecordedby
entityat31December2012,willincreaseby$960,000.

Required
ExplaintheappropriateaccountingtreatmentoftheeventsinthefinancialstatementsofABLtd.forthe
yearended31December2012.

Solution:

(a)ItwillbetreatedasnonadjustingeventasIAS10requiresanyeventwhichgivesrisetolossduetoa
naturaldisastersuchasfire,floodtobeclassifiedasnonadjustingeventbecausesucheventsdonot
provideevidenceoftheconditionsexistedatreportingdate.However,ifthiseventhasaffectedthegoing
concernstatusoftheentitythenitwillbetreatedasadjustingeventandentitywillhavetoprepareits
financialstatementsasperbreakupvalues.
TheInsuranceclaimshouldbedisclosedasacontingentassetinthenotestoaccounts.

(b)Thiswillbetreatedasadjustingeventassaleofinventoryafterthereportingdatereflectsthatthe
NRVofinventoryislessthanthecost.TheNRVof70%inventoryis$476,000calculatedusingthe
sellingpriceof$560,000lesscommissionexpenseof$84,000($560,000*15%),andithasacost
of$644,000($920,000*70%).Therefore,theentitywillneedtoadjustdownthevalueofinventorytoits
NRVof$680,000($476,000/70*100%)inthestatementoffinancialpositionfortheyearended31
December2012.

(c)ThiswilltreatedasoutsidethescopeofIAS10asithasoccurredafterthedateofauthorizationofthe
financialstatementsforissue.Ifithadhaveoccurredafterthereportingdatebutbeforethedateof
authorizationoffinancialstatementsforissue,theninsuchsituationitwouldhavebeentreatedasnon
adjustingevent.

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