Objective To provide guidance on the treatment of

Objective To provide guidance on the treatment of items that arise after the reporting period and before the date upon which the financial statements are approved by management.

Objective The objective of IAS 10 is to describe: when an entity should adjust its financial statements for events after the reporting period; and the disclosures an entity should give about the date when the financial statements were authorised for issue and about events after the reporting period.

Commentary The fundamental question is whether or not to change amounts in the financial statements. Scope IAS 10 should be applied in the accounting for, and disclosure of, events after the reporting period.

Definitions Events after the reporting period - are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date on which the financial statements are authorised for issue. Commentary 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. Essentially, it is when they are approved for publication.

Definitions Two types of events can be identified: those that provide further evidence of conditions that existed at the end of the reporting period ("adjusting events"); and those that are indicative of conditions that arose after the end of the reporting period ("non-adjusting events").

Recognition and measurement Adjusting events An entity should adjust its financial statements for adjusting events after the end of the reporting period. Examples The settlement after the end of the reporting period of a court case that confirms that an entity had a present obligation at the end of the reporting period. Any provision previously recognised is adjusted in accordance with IAS 37.

Commentary Mere disclosure of a contingent liability is not suitable as settlement provides additional evidence regarding the obligation. Bankruptcy of a customer which occurs after the end of the reporting period and confirms that a loss already existed at the end of the reporting period on a trade receivable account.

Non-adjusting events An entity should not adjust its financial statements for non-adjusting events after the reporting period. An example of a non-adjusting event is a decline in market value of investments after the end of the reporting period and before the date on which the financial statements are authorised for issue.

Commentary The fall in market value does not normally relate to the condition of the investments at the end of the reporting period, but reflects circumstances, which have arisen in the following period. Therefore, an entity does not adjust the amounts recognised in its financial statements for that investment.

Examples The following are examples of non-adjusting events that may be of such importance that non-disclosure would affect the ability of the users of the financial statements to make proper evaluations and decisions: a major business combination after the reporting period; the destruction of a major production plant by a fire after the reporting period; and abnormally large changes after the reporting period in asset prices or foreign exchange rates.

Dividends Dividends to owners declared after the reporting period should not be recognised as a liability at the end of the reporting period. Commentary Dividends are often thought of as a distribution of profit and historically have been accounted for in the period to which they relate. However, they do not meet the IAS 37 criteria of present obligation. IAS 1 requires an entity to disclose the amount of dividends that were proposed or declared after the reporting period but before the financial statements were authorised for issue.

Problem 1 Which of the following events after the reporting period provide evidence of conditions that existed at the end of the reporting period? a) Closure of one of fifteen retail outlets b) Discovery of a fraud c) Sales of inventories at less than cost d) Exchange rate fluctuations e) Nationalisation or privatisation by government

f) Out of court settlement of a legal claim g) Rights issue of equity shares h) Strike by workforce i) Earthquake. j) Announcing a plan to discontinue on operation

a) No - Going concern assumption is not appropriate for only a part (1/15th) of the entity. b) Yes - Fraud was perpetrated in year under review. c) Yes - Sales of inventories at less than cost (i.e. net realisable value less than cost). d) No - Movements in foreign exchange rates after the reporting period are in response to changes in economic conditions etc after the reporting period.

e) No - Government action is after the reporting period. f) Yes - Out of court settlement of a legal claim means ultimate outcome known therefore uncertainty eliminated. g) No - Rights not available to shareholders until after the reporting period. h) No - Strike action is after the reporting period (even if the reason for action was an event before the end of the reporting period - e.g. sacking of a colleague). i) No - Natural disaster was not a condition existing at the end of the reporting period. j) No - The operation was not disposed of as at the end of the reporting period. The operation cannot be classified as held for sale at the end of the reporting period as there is no commitment to a plan at that time. (IFRS 5)

Going concern An entity should not prepare its financial statements on a going concern basis if management determines after the reporting period that: It intends to liquidate the entity or to cease trading; or It has no realistic alternative but to do so.

Commentary Deterioration in operating results and financial position after the reporting period may indicate a need to consider whether the going concern assumption is still appropriate. If the going concern assumption is no longer appropriate the IAS requires a fundamental change in the basis of accounting, rather than an adjustment to the amounts recognised within the original basis of accounting.

The following disclosures are required by IAS 1 if the accounts are not prepared on the basis of the going concern assumption: A note saying that the financial statements are not prepared on a going concern basis; or management is aware of material uncertainties related to events or conditions, which may cast significant doubt upon the entity's ability to continue as a going concern.

Authorisation An entity should disclose the date when the financial statements were authorised for issue and who gave that authorisation. If the entity's owners or others have the power to amend the financial statements after issuance, that fact must be disclosed. Commentary Users need to know when the financial statements were authorised for issue, as the financial statements do not reflect events after this date.

Updating Disclosures about conditions that existed at the end of the reporting period should be updated in the light of the new information received after the reporting period. Commentary This applies even when the information does not affect the amounts that it recognises in its financial statements (e.g. in respect of a contingent liability).

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