IAS 10 eng - World Banksiteresources.worldbank.org/EXTCENFINREPREF/Resources/...in IAS 32 Financial Instruments: Presentation) after the reporting period, the entity shall not recognise

© 2013 Deloitte Montenegro

IAS 10Events after the reporting period

November 2013

© 2013 Deloitte Montenegro© 2013 Deloitte Montenegro

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IAS 10 Events after the reporting period2


IAS 10Structure of the standard

3

• Objective, scope and definitions

• Recognition and measurement� Adjusting events

� Non-adjusting events

� Dividends

• Going concern

• Disclosure

IAS 10 Events after the reporting period


IAS 10Objective

4

The objective of this Standard is to prescribe:

� when an entity should adjust its financial statements for events after the reporting period; and

� the disclosures that an entity should give about the date when the financial statements were authorised for issue and about events after the reporting period.

The Standard also requires that an entity should not prepare its financial statements on a going concern basis if events after the reporting period indicate that the going concern assumption is not appropriate.



IAS 10Scope

5

• This Standard shall be applied in the accounting for, and disclosure of, eventsafter the reporting period.

IAS 10



IAS 10Definitions

6

• Events after the reporting period are those events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue.

• Two types of events can be identified:

Those that provide evidence of conditions that existed at the

end of the reporting period

ADJUSTING EVENTS AFTER THE REPORTING PERIOD

Those that are indicative of conditions that arose after

the reporting period

NON-ADJUSTING EVENTS AFTER THE REPORTING PERIOD



IAS 10Date of authorisation for issue of financial statements

7

• The process involved in authorising the financial statements for issue will vary depending upon the management structure, statutory requirements and procedures followed in preparing and finalising the financial statements.

• In some cases, an entity is required to submit its financial statements to its shareholders for approval after the financial statements have been issued. In such cases, the financial statements are authorised for issue on the date of issue, not the date when shareholders approve the financial statements.

• Example 1:

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 the financial statements and authorises them for issue. 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.



IAS 10Date of authorisation for issue of financial statementscontinued

8

• In some cases, the management of an entity is required to issue its financial statements to a supervisory board (made up solely of non-executives) for approval. In such cases, the financial statements are authorised for issue when the management authorises them for issue to the supervisory board.

• Example 2:

On 18 March 20X2, the management of an entity authorises financial statements for issue to its supervisory board. The supervisory board is made up solely of non-executives and may include representatives of employees and other outside interests. The supervisory board approves the financial statements on 26 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 financial statements are then filed with a regulatory body on 17 May 20X2.



IAS 10Adjusting events after the reporting period

9

The following are examples of adjusting events after the reporting period that require an entity to adjust the amounts recognized in its financial statements:

• The settlement after the reporting period of a court case that confirms that the entity had a present obligation at the end of the reporting period,

• The receipt of information after the reporting period indicating that an asset was impaired at the end of the reporting period, or that the amount of a previously recognised impairment loss for that asset needs to be adjusted.

For example:

- the bankruptcy of a customer that occurs after the reporting period usually confirms that a loss existed at the end of the reporting period on a trade receivable and that the entity needs to adjust the carrying amount of the trade receivable; and- the sale of inventories after the reporting period may give evidence about their net realisable value at the end of the reporting period;

• The discovery of fraud or errors.



IAS 10Non-adjusting events after the reporting period

10

An entity shall not adjust the amounts recognised in its financial statements to reflect non-adjusting events after the reporting period:

• A decline in fair value of investments between the end of the reporting period and the date when the financial statements are authorised for issue. The decline in fair value does not normally relate to the condition of the investments at the end of the reporting period, but reflects circumstances that have arisen subsequently. Therefore, an entity does not adjust the amounts recognised in its financial statements for the investments.

• Changes in tax rates or tax laws enacted or announced after the reporting period.

An entity shall disclose the following for each material category of non-adjusting event after the reporting period:� The nature of the event, and� An estimate of its financial effect, or� A statement that such an estimate cannot be made.



IAS 10Non-adjusting events after the reporting period, which require disclosure

11

The following are examples of non-adjusting events after the reporting period that would generally result in disclosure:

• A major business combination after the reporting period or disposing of a major subsidiary

• Announcing a plan to discontinue an operation• Major purchases of assets, disposals of assets, or expropriation of major

assets by government• The destruction of a major production plant by a fire • Announcing, or commencing the implementation of, a major restructuring• Major ordinary share transactions• Abnormally large changes in foreign exchange rates• Entering into significant commitments or contingent liabilities• Commencing major litigation arising solely out of events that occurred after

the reporting period.



IAS 10Dividends

12

� If an entity declares dividends to holders of equity instruments (as defined in IAS 32 Financial Instruments: Presentation) after the reporting period, the entity shall not recognise those dividends as a liability at the end of the reporting period.

� Disclosure in notes.

IAS 10



IAS 10Example 3

13

Rescinding of illegal dividends paid before the end of the reporting periodBackground

Company A distributes dividends to its shareholders at the end of each quarterly interim reporting period. Therefore, at the end of the annual reporting period, Company A has paid out all of the dividends allocated for the period. After the end of the annual reporting period, but before the financial statements are authorised for issue, Company A discovers an error in its final interim financial report relating to conditions that existed at the end of the reporting period. The financial statements are adjusted accordingly, in accordance with IAS 10. The adjustment reduces profits available for dividend distribution below the level at which dividends were paid (i.e. a portion of the dividends distributed during the period should not have been paid out). In the jurisdiction in which Company A operates, there is a legally binding requirement that dividends distributed in excess of available profits be repaid. Therefore, Company A issues demands to its shareholders for return of the appropriate portion of the dividend.

Question

Is the rescinding of the dividend an adjusting event?

Answer?



IAS 10Example 4

14

Rescinding of dividends paid before the end of the reporting period due to cash flow shortageBackground

At the end of the annual reporting period, Company A has paid out all of the dividends allocated for the period. After the end of the reporting period, Company A has a cash-flow shortage and requests shareholders to return a portion of the dividends paid during the reporting period.

Question

Is the request for the dividends to be returned an adjusting event?

Answer?



IAS 10Going concern

15

• 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.

• The effect is so significant that it requires a fundamental change of the accounting basis.



IAS 10Example 5

16

Voluntary liquidation after the reporting period Background

An owner-managed entity's reporting date is 31 December 20X1. At the reporting date, the entity is trading profitably and the owner-managers expect that it will continue to do so. They have no intention to liquidate the entity or to cease trading. But in March 20X2, before the financial statements are authorised for issue, the owner-managers experience an unexpected change in personal circumstances and decide to put the entity into voluntary liquidation.

Question

On what basis should the financial statements at the end of the reporting period for 20X1 be prepared?

Answer?



IAS 10Disclosure

17

• The date when the financial statements were authorised for issue and whogave that authorisation

• Updating disclosure about conditions at the end of the reporting period

• The nature and an estimate of the financial effect of the significant non-adjusting events after the reporting period or a statement that such anestimate cannot be made.

IAS 10



IAS 10Example 6

18

Location for disclosures regarding authorisation of financial statementsBackground

IAS 10.17 requires entities to disclose the date when the financial statements are authorised forissue and who gave that authorisation.

Question

Where should these disclosures be located in the financial statements?

Answer?



IAS 10Example 7

19

"Dual dating" of financial statementsBackground

IAS 10.17 requires that “an entity shall disclose the date when the financial statements wereauthorised for issue”.On 1 August 20X0, the directors of Entity R authorise its financial statements for the year ended 30

June 20X0 to be issued to its shareholders. The financial statements are due to be filed with aregulator on 1 September 20X0.On 20 August 20X0, an event occurs that would have been classified as a non-adjusting event after the reporting period in accordance with IAS 10.3 if the event had occurred before the financial statements were authorised for issue. The directors of Entity R would like to amend (via disclosure) the financial statements that are to be filed with the regulator. They would like to use a 'dual dating' procedure whereby the authorisation date for the financial statements in general would be disclosed as 1 August 20X0, but the specific note containing the updated disclosures would be described as authorised at 20 August 20X0.

Question

Is Entity R permitted to 'dual date' its financial statements as described for the purpose of incorporatinga subsequent event at a date later than the original date of authorisation of the financial statements?

Answer?



Contact

20

Katarina Bulatović, ACCA

Tel: +382 20 228 324

Mob: +382 67 333 826

Mob: +382 69 317 747

E-mail: [email protected]



Thank you for your attention!

21 IAS 10 Events after the reporting period

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IAS 10 eng - World Banksiteresources.worldbank.org/EXTCENFINREPREF/Resources/...in IAS 32 Financial Instruments: Presentation) after the reporting period, the entity shall not recognise

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