IAS 10 Full text Overview
IAS 10 events after the reporting period give guidance as:
- to specify when a company should adjust its financial statements for events that occur after the end of the reporting period, but before the financial statements are authorized for issue.
- to specify the disclosures that should be given about events that have occurred after the end of reporting period but before the financial statements were authorized for issue.
Tackle in TWO simple steps:
- Identify Adjusting and non-Adjusting events.
- Alter financial statements in response to that identified events.
Step 1: IAS 10 - Identifying Adjusting and non-Adjusting events
IAS 10 Adjusting events are those providing evidence of conditions existing at the end of the reporting period.
IAS 10 Examples include:
- A court case after the end of the reporting period, conforming that the entity had a present obligation as at the end of the reporting period.
- An evidence/information that an asset was impaired as at the end of the reporting period: e.g. Bankruptcy of a customer or information about obsolete inventory.
- An asset purchased/sale before the year end but price had not been finally agreed.
- Discovery of fraud or error showing financial statements are incorrect.
Non-adjusting events are indicative of conditions arising after the reporting period.
- A Fall in value of an asset after the end of the reporting period, such as a fall in market valve of investment owned, (A fall in market price will normally reflect conditions arise after the reporting period not conditions already existing as at the end of period).
- The acquisition/disposal of a major subsidiary.
- Announcement of a plan to discontinue a major operation.
- Announcing/commencing the major restructuring.
- The destruction of a major plant by a fire after the reporting period.
- Dividends declared.
Step 2: IAS 10 - Accounting for the Events identified
- These are ADJUSTED in the financial statements. i,e. (an increase/decrease in assets/revenue/liability/capital/expense).
- If a company obtains information about an adjusting event, it should update the financial statements to allow for this information.
- These are DISCLOSED in the financial statements.
- An entity shall not adjust any amount in financial statements:
Hence is required disclosure of:
- the nature of the event.
- an estimate of its financial effect, or a statement that such an estimate cannot be made.
IAS 10 pdf
The above IAS 10 summary is the most simplified version. Moreover, Click here to download the IAS events after the reporting period PDF summary.
* IAS 10 subsequent events is read in context of Audit and assurance course.