Chapter 9 - Events After Balance Date Flashcards
(11 cards)
What standard covers Events After the Balance Date?
IAS 10
What period is covered by events under IAS 10?
Events after the end of the reporting period but before the date on which the financial statements are authorised for issue by the directors.
What 2 types of events are referred to in IAS 10?
- Adjusting events
- Non adjusting events
Adjusting events provide evidence of conditions that existed at the end of the reporting period.
Non-adjusting events arose after the end of the reporting period.
For adjusting events that have been identified under IAS 10, how should these be recognised?
Entity should adjust the financial statements
What are examples of adjusting events under IAS 10?
- Settlement of an outstanding court case. Provision should be amended to reflect the actual settlement figure as a provision
- Finalisation of bonuses that were payable at the year-end
- Discovery of fraud or errors which show that amounts recognised / info presented was incorrect
How should non-adjusting events be treated under IAS 10?
Should be disclosed where the outcome of such events would influence the economic decisions made by users of financial statements.
Provide the nature of the event and estimate of its financial effect, or state that such an estimate cannot be made
What are examples of non-adjusting events under IAS 10?
- Major purchase of a subsidiary, or PPE
- Announcement of a major restructuring plan
- Destruction of assets caused by a fire occurring after the end of the reporting period
- Significant fluctuation in Forexor income tax rates
- Entering into major commitments or providing a significant guarantee
- Commencement of litigation following an event after the end of reporting period
Under IAS 10, do dividends proposed or declared after the end of reporting period recognised as a liability?
No.
To be recognised as a liability, the entity should have an obligation at the end of the reporting period.
Obligation for a dividend only arises when it has been declared, so it is at the declaration date that the liability is recognised.
Where a dividend has been declared after the end of the reporting period, should this be disclosed under IAS 10 ?
Yes.
A liability is not recognised, but the declared dividend should be disclosed.
If management determines after the end of the reporting period that it intends to (or has no alternative to) liquidate the entity / cease trading, how should the financial statements be prepared under IAS 10?
Should not be presented as a going concern.
Financial statements should be prepared on a basis considered more appropriate in the circumstances, although no specific guidance is provided in IAS 10.
