Question

Problem 1: Post-Period Reporting The objective of IAS 10 Events after the Reporting Period is to prescribe the treatment of events that occur after an entity’s reporting period has ended. Required: Define the period to which IAS 10 relates and distinguish between adjusting and non-adjusting events.

Answer 1

The period to which IAS 10 " Events after the reporting period" relates is the period between the end of reporting period and the date on which the financial statements are authorised for issue.

Example - If the reporting period ends on 30th September and the financial statements are authorised for issue by the authorities on 31st December, then the events occurring between 30th September and 31st December are covered under the IAS 10 and are known as events occurring after the reporting period.

Now such events can be adjusting event or a non adjusting event.

1.Adjusting events are those events which occur after the reporting period that provide further additional evidence of conditions that happened to be existed at the end of reporting period and adjusting event also indicates whether the going concern assumption in relation to the whole or part of the enterprise is appropriate or not.

Non adjusting events are events occurring after the reporting period that is reflective of condition that arose after the end of the reporting period.

2. Adjustment in accounting is provided for the adjusting events as they provide for additional information related to conditions that exist at the end of reporting period.

Non adjusting events are not adjusted in the financial statements.

3. Adjusted events are disclosed where as non adjusting events are not disclosed. Exception - If there is statutory requirement or they are important to make proper evaluations and decisions. If the non adjusting event is material, then the nature and estimate of material non adjusting event shall be disclosed in the financial statements.

4. Example of adjusting event -

Contingent litigation case - on the basis of legal advice provided, there are 70% chances that the court decision would be unfavourable to the company. So, the company created provision for damage in legal case. Then if the court decision comes befoe the date of authorisation of issue of financial statements, the provision should be adjusted accordingly.

Example of non adjusting event -

Destruction of assets due to some natural calamity.