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Chapter 7
EVENTS AFTER THE REPORTING PERIOD (IAS 10)
BACKGROUND AND INTRODUCTION
The end of the reporting period is the pivotal date at which the financial position of an entity is determined and reported. Thus, events that occur up to that date are
critical in arriving at an entity’s financial results and the financial position. However, sometimes events occurring after the reporting period may provide additional
information about events that occurred before and up to the end of the reporting period. This information may have an impact on the financial results and the financial
position of the entity. It is imperative that those post-reporting period events up to a certain “cut-off date” (discussed later and referred to as the authorization date) be
taken into account in preparing the financial statements for the year ended and at the end of the reporting period.
Additionally, certain events that occur after the end of the reporting period might not affect the figures reported in the financial statements but may warrant
disclosure in footnotes to the financial statements. Informing users of financial statements about such post – reporting period events through footnote disclosures helps
them make informed decisions with respect to the entity, keeping in mind the impact these post – reporting period events may have on the financial position of the
entity at the end of the reporting period.
SCOPE
IAS 10, Events after the Reporting Period, provides guidance on accounting and disclosure of events after the reporting period. For the purposes of this Standard,
post – reporting period events are categorized into “adjusting” and “nonadjusting” events. The issue addressed by the Standard, IAS 10, is to what extent anything that
happens during the period when the financial statements are being prepared should be reflected in those financial statements. The Standard distinguishes between
events that provide information about the state of the entity at the end of the reporting period and those that concern the next financial period. A secondary issue is the
cutoff point beyond which the financial statements are considered to be finalized.
DEFINITIONS OF KEY TERMS
Events after the reporting period. Those post – reporting period events, both favorable and unfavorable that occur between the end of the reporting period
and the date when the financial statements are authorized for issue.
Adjusting events after the reporting period. Those post – reporting period events that provide evidence of conditions that existed at the end of the
reporting period.
Nonadjusting events after the reporting period. Those post – reporting period events that are indicative of conditions that arose after the reporting period.
AUTHORIZATION DATE
The authorization date is the date when the financial statements could be considered legally authorized for issuance. The determination of the authorization date is
critical to the concept of events after the reporting period. The authorization date serves as the cutoff point after the end of the reporting period up to which the post –
reporting period events are to be examined in order to ascertain whether such events qualify for the treatment prescribed by IAS 10. This Standard explains the concept
through the use of examples.
The general principles that need to be considered in determining the “authorization date” of the financial statements are set out next.
• When an entity is required to submit its financial statements to its shareholders for approval after they have already been issued, the authorization date in this
case would mean the date of original issuance and not the date when these are approved by the shareholders.
• When an entity is required to issue its financial statements to a supervisory board made up wholly of nonexecutives, “authorization date” would mean the date
on which management authorizes them for issue to the supervisory board.
Facts
CASE STUDY 1
The preparation of the financial statements of Excellent Corp. for the accounting period ended December 31, 2009, was completed by the management on
March 15, 2010. The draft financial statements were considered at the meeting of the board of directors held on March 20, 2010, on which date the board
approved them and authorized them for issuance. The annual general meeting (AGM) was held on April 10, 2010, after allowing for printing and the
requisite notice period mandated by the corporate statute. At the AGM the shareholders approved the financial statements. The approved financial
statements were filed by the corporation with the Company Law Board (the statutory body of the country that regulates corporations) on April 20, 2010.
Required