IAS 10 deals with Events after Reporting Period. This IAS is very much important for the auditors who need to check subsequent positions of all the balances in the financial position to determine whether or not any adjustment required in the financial statements. So we can say that an auditor must have complete grip on the IAS 10 in order to conduct his audit appropriately. Normally IAS 10 is so simple that we do not bother to read it so there are chances that any important concept may be overlooked. Keeping in view this fact Summary of IAS 10 is prepared that covers all concepts of IAS 10 in a concise way. It is very useful for students for revision purpose as well.
Summary of IAS 10 (Events after Reporting Period) is provided here in order to enable students and professionals to grasp spirit of IAS 10 (Events after Reporting Period) in a short span of time. Events after the reporting period are defined in IAS 10 (Events after Reporting Period) as the events that occur between the end of the reporting period and the date when the financial statements are authorized for issue. There are two types of events after the reporting period i.e. adjusting and non-adjusting events. The period between the year end (31st December, 2009) and the date when the financial statements are authorized for issue (25th March 2010) is called post reporting date period.
Adjusting Events are defined in IAS 10 (Events after Reporting Period) as those that provide evidence of conditions that existed at the end of the reporting period. Important thing is that condition must have been in existence at the year end. Many estimates are made at the year end e.g. impairment losses, doubtful debts, provision for legal expenses etc. If new information is discovered in the post reporting date period, these estimates need to be changed accordingly.
For example, a debtor was treated as a normal debtor till the year end (31st December 2009) and normal provision of 2% of doubtful debts was made at year end. Fire occurred in a debtor’s factory on 15th December 2009 and he filed for insolvency but you had no knowledge about it when you were preparing financial statements at year end. Debtor’s lawyer informed you that debtor will be able to pay only 30% of the balance on 20th February 2010. Financial statements are authorized for issue on 25th March 2010. Since the events was occurred before year end, so this event is categorized as Adjusting Event and current year’s financial statements need to be changed accordingly. So an addition of 67% of the amount of that particular debtor will be provided in the doubtful debts and debtors will be reduced accordingly with that amount.
Non-Adjusting Events after the reporting period are defined in IAS 10 (Events after Reporting Period) as the events that indicate the conditions arose after the post reporting date period. These events are not adjusted in the current year’s financial statements. However, if these events are material, they need to be disclosed in the financial statements.
For example, a debtor was treated as a normal debtor till the year (31st December 2009) end and normal provision of 2% of doubtful debts was made at year end. Fire occurred in a debtor’s factory on 5th January 2010 and he filed for insolvency. Debtor’s lawyer informed you that debtor will be able to pay only 30% of the balance on 20th February 2010. Financial statements are authorized for issue on 25th March 2010. Since the events was occurred after year end, so this event is categorized as Non-Adjusting Event and current year’s financial statements need not to be changed. However, if the amount receivable from debtor is material, it needs to be disclosed in the financial statements.
Dividends are declared in the post reporting period, so the liability to pay off the dividend also arises after the reporting date. This is why IAS 10 (Events after Reporting Period) prohibits the recognition of dividend in the financial statements until it is not declared.
Going Concern Issue – An Exception
Management makes a formal assessment of the ability of the entity to continue as going concern. If it is considered that going concern assumption is no longer appropriate, then the financial statements will need to be completely revised, whether or not the condition was in existence at year end.
The date when the financial statements were authorized for issue must be disclosed in the financial statements according to IAS 10 (Events after Reporting Period).
It concludes IAS 10 (Events after Reporting Period). I hope it was helpful for you to have complete understanding of all concepts of IAS 10 (Events after Reporting Period) in short time. Please do not forget to leave your comments below.
Summary of IAS 10 (Events after Reporting Period) is provided here in order to enable students and professionals to grasp spirit of IAS 10 (Events after Reporting Period) in a short span of time. Events after the reporting period are defined in IAS 10 (Events after Reporting Period) as the events that occur between the end of the reporting period and the date when the financial statements are authorized for issue. There are two types of events after the reporting period i.e. adjusting and non-adjusting events. The period between the year end (31st December, 2009) and the date when the financial statements are authorized for issue (25th March 2010) is called post reporting date period.
Adjusting Events are defined in IAS 10 (Events after Reporting Period) as those that provide evidence of conditions that existed at the end of the reporting period. Important thing is that condition must have been in existence at the year end. Many estimates are made at the year end e.g. impairment losses, doubtful debts, provision for legal expenses etc. If new information is discovered in the post reporting date period, these estimates need to be changed accordingly.
For example, a debtor was treated as a normal debtor till the year end (31st December 2009) and normal provision of 2% of doubtful debts was made at year end. Fire occurred in a debtor’s factory on 15th December 2009 and he filed for insolvency but you had no knowledge about it when you were preparing financial statements at year end. Debtor’s lawyer informed you that debtor will be able to pay only 30% of the balance on 20th February 2010. Financial statements are authorized for issue on 25th March 2010. Since the events was occurred before year end, so this event is categorized as Adjusting Event and current year’s financial statements need to be changed accordingly. So an addition of 67% of the amount of that particular debtor will be provided in the doubtful debts and debtors will be reduced accordingly with that amount.
Non-Adjusting Events after the reporting period are defined in IAS 10 (Events after Reporting Period) as the events that indicate the conditions arose after the post reporting date period. These events are not adjusted in the current year’s financial statements. However, if these events are material, they need to be disclosed in the financial statements.
For example, a debtor was treated as a normal debtor till the year (31st December 2009) end and normal provision of 2% of doubtful debts was made at year end. Fire occurred in a debtor’s factory on 5th January 2010 and he filed for insolvency. Debtor’s lawyer informed you that debtor will be able to pay only 30% of the balance on 20th February 2010. Financial statements are authorized for issue on 25th March 2010. Since the events was occurred after year end, so this event is categorized as Non-Adjusting Event and current year’s financial statements need not to be changed. However, if the amount receivable from debtor is material, it needs to be disclosed in the financial statements.
Dividends are declared in the post reporting period, so the liability to pay off the dividend also arises after the reporting date. This is why IAS 10 (Events after Reporting Period) prohibits the recognition of dividend in the financial statements until it is not declared.
Going Concern Issue – An Exception
Management makes a formal assessment of the ability of the entity to continue as going concern. If it is considered that going concern assumption is no longer appropriate, then the financial statements will need to be completely revised, whether or not the condition was in existence at year end.
The date when the financial statements were authorized for issue must be disclosed in the financial statements according to IAS 10 (Events after Reporting Period).
It concludes IAS 10 (Events after Reporting Period). I hope it was helpful for you to have complete understanding of all concepts of IAS 10 (Events after Reporting Period) in short time. Please do not forget to leave your comments below.
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