Events After The Reporting Period (IAS 10)

Events after the Reporting
Period (IAS 10)
This material is the property of Department of Accounting and Finance, CoBE, AAU.1
Permission must be obtained from the Department prior to reproduction
Types of events after the reporting period the
broad principles
 Those events, favourable and unfavourable, that occur between

the end of the reporting period and the date when the FSs are
authorised for issue.
3
Types of events after the reporting period the
broad principles
 Adjusting events―those that provide evidence of

conditions that existed at the end of the reporting
period
 adjust the amounts recognised in financial statements
 Non-adjusting events―those that are indicative
of conditions that arose after the end of the
reporting period
 do not adjust the amounts recognised in its financial
statements; disclose the nature of the event and its
financial effect
Date of Authorization for issue
 The management of an entity completes draft financial statements
for the year to 31 December 20X1 on 28 February 20X2. On 18
March 20X2, the board of directors reviews and approves the
financial statements. The entity announces its profit and selected
other financial information on 19 March 20X2. The financial
statements are made available to shareholders and others on 1
April 20X2. The shareholders approve the financial statements at
their annual meeting on 15 May 20X2 and the approved financial
statements are then filed with a regulatory body on 17 May 20X2.
 What is Date of Authorization for issue?
5
Event after the reporting period: what do you
think?
 On 15 March 2016 when the entity’s financial statements were

authorised for issue, the spot exchange rate = ETB22:$1.
 At 31 December 2015 the spot exchange rate = ETB21:$1.
At what amount must the entity (functional currency = ETB)
measured its $100 million unhedged non‑current liability in its
31 December 2015 statement of financial position?
Choose one of:
1) ETB2,100 million (non-adjusting event)
2) ETB2,200 million (adjusting event)
think?
 ABEBA Ltd. decided to operate a new Car Manufacturing Unit
that will cost ETB1 million to build in the year 2005. Its financial
year-end is December 31, 2005. ABEBA Ltd. has applied for a
letter of guarantee for ETB700,000 to import parts. The letter of
guarantee was issued on March 31, 2006. The audited financial
statement have been authorized to be issued on April 18, 2006.
 The adjustment required to be made to the FSs for the year
ended December 31, 2005, should be:
a) Booking a ETB700,000 long-term payable.
b) Disclosing ETB700,000 as a contingent liability in 2005 financial
statement.
c) Increasing the contingency reserve by ETB700,000.
d) Do nothing.
think?
 Excellent Inc. built a new factory building during 2005 at a cost

of ETB20 million. At December 31, 2005, the net book value of
the building was ETB19 million.
 Subsequent to year-end, on March 15, 2006, the building was
destroyed by fire and the claim against the insurance company
proved futile because the cause of the fire was negligence on
the part of the caretaker of the building. If the date of
authorization of the FSs for the year ended December 31, 2005,
was March 31, 2006.
think?
think?
 On December 31, 2005 Excellent Inc. should

a) Write off the net book value to its scrap value because the
insurance claim would not fetch any compensation.
b) Make a provision for one-half of the net book value of the
building.
c) Make a provision for three-fourths of the net book value of
the building based on prudence.
d) Disclose this non-adjusting event in the footnotes.
think?
 At the balance sheet date, December 31, 2015, ABC Inc. carried
a receivable from XYZ, a major customer, at ETB10 million. The
“authorization date” of the financial statements is on February
16, 2016. XYZ declared bankruptcy on February 14, 2016.
think?
 ABC Co. will:

a) Disclose the fact that XYZ has declared bankruptcy in the
footnotes.
b) Make a provision for this post–balance sheet event in its
financial statements (as opposed to disclosure in footnotes).
c) Ignore the event and wait for the outcome of the bankruptcy
because the event took place after the year-end.
d) Reverse the sale pertaining to this receivable in the
comparatives for the prior period and treat this as an “error”
under IAS 8.
Disclosure
 An entity shall disclose the date when the financial statements were
authorized for issue and who gave that authorization. If the entity’s
owners or others have the power to amend the financial statements
after issue, the entity shall disclose that fact.
 Updating disclosure about conditions at the end of the reporting
period: If an entity receives information after the reporting period
about conditions that existed at the end of the reporting period, it
shall update disclosures that relate to those conditions, in the light of
the new information.
 If non-adjusting events after the reporting period are material, non-
disclosure could influence the economic decisions that users make
on the basis of the financial statements. Accordingly, an entity shall
disclose the following for each material category of non-adjusting
event after the reporting period: (a) the nature of the event; and (b)
an estimate of its financial effect, or a statement that such an
estimate cannot be made.
Thank You
Disclosure…
 The following are examples of non-adjusting events after the
reporting period that would generally result in disclosure:
 (a) a major business combination after the reporting period
(IFRS 3 Business Combinations requires specific disclosures
in such cases) or disposing of a major subsidiary;
 (b) announcing a plan to discontinue an operation;
 (c) major purchases of assets, classification of assets as held

for sale in accordance with IFRS 5 Non-current Assets Held for
Sale and Discontinued Operations , other disposals of assets,
or expropriation of major assets by government;
 (d) the destruction of a major production plant by a fire after
the reporting period;
 (e) announcing, or commencing the implementation of, a major
restructuring (see IAS 37);
Disclosure…
 (f) major ordinary share transactions and potential ordinary share
transactions after the reporting period (IAS 33 Earnings per Share
requires an entity to disclose a description of such transactions,
other than when such transactions involve capitalisation or bonus
issues, share splits or reverse share splits all of which are
required to be adjusted under IAS 33);
 (g) abnormally large changes after the reporting period in asset
prices or foreign exchange rates;
 (h) changes in tax rates or tax laws enacted or announced after
the reporting period that have a significant effect on current and
deferred tax assets and liabilities (see IAS 12 Income Taxes);
 (i) entering into significant commitments or contingent liabilities,
for example, by issuing significant guarantees; and
 (j) commencing major litigation(lawsuit) arising solely out of
events that occurred after the reporting period.

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Events after the Reporting

Period (IAS 10)

 Those events, favourable and unfavourable, that occur between

 Adjusting events―those that provide evidence of

 On 15 March 2016 when the entity’s financial statements were

 Excellent Inc. built a new factory building during 2005 at a cost

 On December 31, 2005 Excellent Inc. should

 ABC Co. will:

 (c) major purchases of assets, classification of assets as held

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