Standard 10: Events after the reporting period

Standard 10: Events after the reporting period · Complied AI

(b)

those that are indicative of conditions that arose after the reporting period

(non-adjusting events after the reporting period).

2 Notwithstanding anything contained above, where there is a breach of a material

provision of a long-term loan arrangement on or before the end of the reporting period with the effect that the

liability becomes payable on demand on the reporting date, the agreement by lender before the approval of the

financial statements for issue, to not demand payment as a consequence of the breach, shall be considered as an

adjusting event.

4 The process involved in approving the financial statements for issue will vary depending upon the management

structure, statutory requirements and procedures followed in preparing and finalising the financial statements.

5 In some cases, an entity is required to submit its financial statements to its shareholders for approval after the

financial statements have been approved by the Board for issue. In such cases, the financial statements are approved

for issue on the date of approval by the Board, not the date when shareholders approve the financial statements.

6 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 approved for issue

when the management approves them for issue to the supervisory board.

Example

On 18 March 20X2, the management of an entity approves 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. The financial statements are approved

for issue on 18 March 20X2 (date of management approval for issue to the supervisory board).

7 Events after the reporting period include all events up to the date when the financial statements are approved for

issue, even if those events occur after the public announcement of profit or of other selected financial

information.

Recognition and measurement

Adjusting events after the reporting period

8 An entity shall adjust the amounts recognised in its financial statements to reflect adjusting events

after the reporting period.

9 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:

(e)

the discovery of fraud or errors that show that the financial statements are incorrect.

Non-adjusting events after the reporting period

10 An entity shall not adjust the amounts recognised in its financial statements to reflect non-adjusting

events after the reporting period.

11 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 approved 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.

Dividends

12 If an entity declares dividends to holders of equity instruments (as defined in Ind AS 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.

13 If dividends are declared after the reporting period but before the financial statements are approved 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 Ind AS 1, Presentation of Financial Statements.

Going concern

14 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 Ind AS 1 specifies required

disclosures if:

(b)

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.

Disclosure

Date of approval for issue

17 An entity shall disclose the date when the financial statements were approved for issue and who gave

that approval. If the entity’s owners or others have the power to amend the financial statements after issue,

the entity shall disclose that fact.

18 It is important for users to know when the financial statements were approved for issue, because the financial

statements do not reflect events after this date.

Updating disclosure about conditions at the end of the reporting period

19 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.

20 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 Ind AS 37, an entity updates its disclosures

about the contingent liability in the light of that evidence.

Non-adjusting events after the reporting period

21 3 If non-adjusting events after the reporting period are

material, non- disclosure could reasonably be expected to influence decisions that the primary users of general

purpose financial statements make on the basis of those financial statements, which provide financial

information about a specific reporting entity. Accordingly, an entity shall disclose the following for each

material category of non-adjusting event after the reporting period-

(b)

distributions that give owners a choice of receiving either non- cash assets or a cash alternative.

4 This Appendix applies only to distributions in which all owners of the same class of equity instruments are treated

equally.

5 This Appendix does not apply to a distribution of a non-cash asset that is ultimately controlled by the same party

or parties before and after the distribution. This exclusion applies to the separate, individual and consolidated

financial statements of an entity that makes the distribution.

6 In accordance with paragraph 5, this Appendix does not apply when the non-cash asset is ultimately controlled by

the same parties both before and after the distribution. Paragraph 7 of Appendix C to Ind AS 103 states that

‘A group of individuals shall be regarded as controlling an entity when, as a result of contractual

arrangements, they collectively have the power to govern its financial and operating policies so as to obtain

benefits from its activities, and that ultimate collective power is not transitory.’ Therefore, for a

distribution to be outside the scope of this Appendix on the basis that the same parties control the asset both

before and after the distribution, a group of individual shareholders receiving the distribution must have, as a

result of contractual arrangements, such ultimate collective power over the entity making the distribution.

7 In accordance with paragraph 5, this Appendix does not apply when an entity distributes some of its ownership

interests in a subsidiary but retains control of the subsidiary. The entity making a distribution that results in

the entity recognising a non-controlling interest in its subsidiary accounts for the distribution in accordance with

Ind AS 110.

8 This Appendix addresses only the accounting by an entity that makes a non-cash asset distribution. It does not

address the accounting by shareholders who receive such a distribution.

Issues

9 When an entity declares a distribution and has an obligation to distribute the assets concerned to its owners, it

must recognise a liability for the dividend payable. Consequently, this Appendix addresses the following issues: