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In: Accounting

Discuss events after the balance sheet date

Discuss events after the balance sheet date

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Expert Solution

Events after the balance sheet date are divided into two types, corresponding to the two examples just given. The definition in IAS 10 is:

Events after the balance sheet date are those events, both favourable and unfavourable, that occur between the balance sheet date and the date when the financial statements are authorised for issue.

Two types of events can be identified:

(a) those that provide evidence of conditions that existed at the balance sheet date (adjusting events after the balance sheet date); and

(b) those that are indicative of conditions that arose after the balance sheet date (nonadjusting events after the balance sheet date).

Some of the examples are:

(a) decline in market value of investments;

(b) announcement of a plan to discontinue part of the enterprise;

(c) major purchases and sales of assets;

(d) expropriation of assets by government;

(e) destruction of a major asset by fire etc;

(f) a major business combination after the balance sheet date;

(g) sale of a major subsidiary;


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