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IAS 10 - Events after the reporting period - TutnIQ
Table of contents X
  • Recognition and measurement

  • Adjusting events:

    In the case of adjusting events after the reporting period, the amounts in the financial statements (at the end of the reporting period) must be adjusted to reflect the adjusting event. This may entail recognizing an amount which was not previously recognized. [Tip: This typically requires an adjusting journal in the general ledger.]

    Examples of adjusting events

    • Litigation: A court finding confirms that a present obligation existed at the end of the reporting period. In such a case it will be necessary to either adjust a provision or change a contingent liability into a provision.

    • Evidence that an asset was impaired at the end of the reporting period:

      • Trade debtor (i.e. receivable) goes bankrupt after the end of the reporting period. This may provide evidence that the customer was in financial difficulty and that a loss existed at the end of the reporting period, requiring an adjustment to the carrying amount of the receivable.
      • Sales of inventory after the reporting period may provide evidence of the net realizable value of the inventory at the end of the reporting period.

    Non-adjusting events:

    In the case of non-adjusting events after the reporting period, no adjustment to the amounts in the financial statements may be made at the end of the reporting period, although disclosure may be necessary if the event is considered to be material.

    Examples of non-adjusting events

    • Decline in the market value of investments, AFTER the end of the reporting period.
    • Loss of assets due to fire / flood / tornado / etc, AFTER the end of the reporting period.

    Decision logic

    The following flowchart illustrates the decision logic to be applied when dealing with events after the reporting period:

  • Image - Flickr - Michael Lockyear
  • The following events occurred shortly after period-end. Which are most likely to be considered adjusting events after the reporting period, per IAS 10:

    Please select the correct answer(s):

    out of points awarded.

  • The following events occurred shortly after period-end. Which are most likely to be considered non-adjusting events after the reporting period, per IAS 10:

    Please select the correct answer(s):

    out of points awarded.

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