Identifying the condition to recognise “Events after the Reporting Period”

IAS 10 Events after the Reporting Period replaces IAS 10 Events After the Balance Sheet Date (revised in 1999) and should be applied for annual periods beginning on or after 1 January 2005.

The main change from the previous version of IAS 10 was a limited clarification of par. 12 and 13. As revised, those paragraphs state that if an entity declares dividends after the reporting period, the entity shall not recognise those dividends as a liability at the end of the reporting period.

When an entity should recognise “Events after the Reporting Period” in the financial statements ?

IAS 10 par. 3 – 7 underlines several guidances regarding above question.

Par. 3 defines “Events after the Reporting Period” as those events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue. Two types of events can be identified :

1. those that provide evidence of conditions that existed at the end of the reporting period (adjusting events after the reporting period); and
2. those that are indicative of conditions that arose after the reporting period (non-adjusting events after the reporting period).

The process involved in authorising the financial statements for issue will vary depending upon the management structure, statutory requirements and procedures followed in preparing and finalising the financial statements.

In some cases, an entity is required to submit its financial statements to its shareholders for approval after the financial statements have been issued. In such cases, the financial statements are authorised for issue on the date of issue, not the date when shareholders approve the financial statements.

Example, the management of an entity completes draft financial statements for the year to 31 December 20X1 on 28 February 20X2. On 18 March 20X2, the board of directors reviews the financial statements and authorises them for issue. The entity announces its profit and selected other financial information on 19 March 20X2. The financial statements are made available to shareholders and others on 1 April 20X2. The shareholders approve the financial statements at their annual meeting on 15 May 20X2 and the approved financial statements are then filed with a regulatory body on 17 May 20X2.

In this condition, the financial statements are authorised for issue on 18 March 20X2 (date of board authorisation for issue).

In some cases, the management of an entity is required to issue its financial statements to a supervisory board (made up solely of non-executives) for approval . In such cases, the financial statements are authorised for issue when the management authorises them for issue to the supervisory board.

Example, on 18 March 20X2, the management of an entity authorises financial statements for issue to its supervisory board. The supervisory board is made up solely of non-executives and may include representatives of employees and other outside interests. The supervisory board approves the financial statements on 26 March 20X2. The financial statements are made available to shareholders and others on 1 April 20X2. The shareholders approve the financial statements at their annual meeting on 15 May 20X2 and the financial statements are then filed with a regulatory body on 17 May 20X2.

In this condition, the financial statements are authorised for issue on 18 March 20X2 (date of management authorisation for issue to the supervisory board).

Events after the reporting period include all events up to the date when the financial statements are authorised for issue, even if those events occur after the public announcement of profit or of other selected financial information (Hrd). ***