1 Adjusting events after the reporting period
An entity shall adjust the amounts recognised in its financial statements to reflect adjusting events after the reporting period.
The following are examples of adjusting events after the reporting period that require an entity to adjust the amounts recognised in its financial statements, or to recognise items that were not previously recognised:
- The settlement after the reporting period of a court case that confirms that the entity had a present obligation at the end of the reporting period. The entity adjusts any previously recognised provision related to this court case in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets or recognises a new provision. The entity does not merely disclose a contingent liability because the settlement provides additional evidence that would be considered in accordance with paragraph 16 of IAS 37.
- The receipt of information after the reporting period indicating that an asset was impaired at the end of the reporting period, or that the amount of a previously recognised impairment loss for that asset needs to be adjusted. For example:
- The bankruptcy of a customer that occurs after the reporting period usually confirms that a loss existed at the end of the reporting period on a trade receivable and that the entity needs to adjust the carrying amount of the trade receivable; and
- The sale of inventories after the reporting period may give evidence about their net realisable value at the end of the reporting period.
- The determination after the reporting period of the cost of assets purchased, or the proceeds from assets sold, before the end of the reporting period.
- The determination after the reporting period of the amount of profit-sharing or bonus payments, if the entity had a present legal or constructive obligation at the end of the reporting period to make such payments as a result of events before that date (see IAS 19 Employee Benefits).
- The discovery of fraud or errors that show that the financial statements are incorrect.
2 Non-adjusting events after the reporting period
An entity shall not adjust the amounts recognised in its financial statements to reflect non-adjusting events after the reporting period.
An example of a non-adjusting event after the reporting period is a decline in fair value of investments between the end of the reporting period and the date when the financial statements are authorised for issue. The decline in fair value does not normally relate to the condition of the investments at the end of the reporting period, but reflects circumstances that have arisen subsequently. Therefore, an entity does not adjust the amounts recognised in its financial statements for the investments. Similarly, the entity does not update the amounts disclosed for the investments as at the end of the reporting period, although it may need to give additional disclosure under paragraph 21.
12 If an entity declares dividends to holders of equity instruments (as defined in IAS 32 Financial Instruments: Presentation) after the reporting period, the entity shall not recognise those dividends as a liability at the end of the reporting period.
If dividends are declared after the reporting period but before the financial
statements are authorised for issue, the dividends are not recognised as a liability at the end of the reporting period because no obligation exists at that time. Such dividends are disclosed in the notes in accordance with IAS 1 Presentation of Financial Statements.
2.2 Going concern
An entity shall not prepare its financial statements on a going concern basis if management determines after the reporting period either that it intends to liquidate the entity or to cease trading, or that it has no realistic alternative but to do so.
15 Deterioration in operating results and financial position after the reporting period may indicate a need to consider whether the going concern assumption is still appropriate. If the going concern assumption is no longer appropriate, the effect is so pervasive that this Standard requires a fundamental change in the basis of accounting, rather than an adjustment to the amounts recognised within the original basis of accounting.
16 IAS 1 specifies required disclosures if:
- The financial statements are not prepared on a going concern basis; or
- Management is aware of material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern. The events or conditions requiring disclosure may arise after the reporting period.
3.1 Date of authorisation for issue
An entity shall disclose the date when the financial statements were authorised for issue and who gave that authorisation. If the entity’s owners or others have the power to amend the financial statements after issue, the entity shall disclose that fact.
It is important for users to know when the financial statements were authorised for issue, because the financial statements do not reflect events after this date.
Updating disclosure about conditions at the end of the reporting period
If an entity receives information after the reporting period about conditions that existed at the end of the reporting period, it shall update disclosures that relate to those conditions, in the light of the new information.
In some cases, an entity needs to update the disclosures in its financial statements to reflect information received after the reporting period, even when the information does not affect the amounts that it recognises in its financial statements. One example of the need to update disclosures is when evidence becomes available after the reporting period about a contingent liability that existed at the end of the reporting period. In addition to considering whether it should recognise or change a provision under IAS 37, an entity updates its disclosures about the contingent liability in the light of that evidence.
3.2 Non-adjusting events after the reporting period
If non-adjusting events after the reporting period are material, non-disclosure could influence the economic decisions that users make on the basis of the financial statements. Accordingly, an entity shall disclose the following for each material category of non-adjusting event after the reporting period:
- The nature of the event; and
- An estimate of its financial effect, or a statement that such an estimate cannot be made.
The following are examples of non-adjusting events after the reporting period that would generally result in disclosure:
- A major business combination after the reporting period (IFRS 3 Business Combinations requires specific disclosures in such cases) or disposing of a major subsidiary;
- Announcing a plan to discontinue an operation;
- Major purchases of assets, classification of assets as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, other disposals of assets, or expropriation of major assets by government;
- The destruction of a major production plant by a fire after the reporting period;
- Announcing, or commencing the implementation of, a major restructuring (see IAS 37);
- Major ordinary share transactions and potential ordinary share transactions after the reporting period (IAS 33 Earnings per Share requires an entity to disclose a description of such transactions, other than when such transactions involve capitalisation or bonus issues, share splits or reverse share splits all of which are required to be adjusted under IAS 33);
- Abnormally large changes after the reporting period in asset prices or foreign exchange rates;
- Changes in tax rates or tax laws enacted or announced after the reporting period that have a significant effect on current and deferred tax assets and liabilities (see IAS 12 Income Taxes);
- Entering into significant commitments or contingent liabilities, for example, by issuing significant guarantees; and
- Commencing major litigation arising solely out of events that occurred after the reporting period.
|Events||Explanation||After Reporting Period|
Present condition as a result of past events before or on reporting date.
Impairment of Inventory. After reporting date period, when inventory sold, it was known that inventory was impaired before the reporting period.
Reliable estimate can be made.
Reliable estimate can be made from the sale proceeds of the inventory.
|Adjust according to IAS 8 Accounting Policies, Errors and Estimates.|
No present condition
Dividend declared after the reporting period.
Reliable estimate cannot be made.
Loss of reputation due to customer action.