Events After the Balance Sheet Date IAS-10

Terms Events after the balance sheet date Adjusting events Non-adjusting events

Explanation The events, favourable or non-favourable, that occur between the balance sheet date and the date when the financial statements are authorized for issue. Those events that provide evidence of the conditions that existed at the balance sheet date The events that are indicative of the conditions that arose after the balance sheet date.

Recognition and measurement Adjusting events The entity shall adjust the amounts recognized in its financial statements to reflect adjusting events after the balance sheet date. Examples; 1. the settlement of court cases 2. the receipt of new information which indicate the asset was impaired at balance sheet date. 3. The bankruptcy of a customer 4. The sale of inventory after balance sheet date gives an evidence of the net realizable value of inventory at balance sheet date. 5. Determination after the balance sheet date of cost of asset purchased or proceeds of assets sold before balance sheet date. 6. The determination of profit sharing or bonus after balance sheet date if the entity has a legal or constructive obligation at the balance sheet date. 7. The discovery of fraud or error that show that the financial statements were incorrect.

Non-adjusting events

The entity shall not adjust the amounts recognized in its financial statements to reflect non-adjusting events after the balance sheet date. Examples; 1. Decline in the value of investments after balance sheet date. 2. If an entity declares dividend to the equity instrument holders, it should not be recognized as a liability in the balance sheet. 3. Major business combination after the balance sheet date. 4. Announcing a plan to discontinue an operation. 5. Major purchase of assets, classification of asset as held for sale or disposal or expropriation of major assets 6. The destruction of plant by fire 7. Announcing or commencing the implementation of restructuring. 8. Major ordinary share transactions and potential ordinary share transactions. 9. Abnormally large changes after the balance sheet date in asset prices or foreign exchange rate. 10. Change in tax rates or tax laws enacted or announced after the balance sheet date. 11. Entering into significant commitments or contingent liabilities e.g. by issuing significant guarantees. 12. Commencing major litigation arising solely out of events that occurred after the balance sheet date. If entity obtains information after balance sheet date about conditions that existed at the balance sheet date, it shall update the disclosures that relate to those conditions, in the light of the new information. The entity shall not prepare its financial statement on a going concern basis if the management determines after the balance sheet date either it intends to liquidate the entity or to cease trading or that it has no other realistic alternative but to do so. The entity shall disclose the date of authorization for issue. If the entitys owner or others have the power to amend the financial statements after issue, the entity shall disclose that fact.

Going concern

Date of authorization