EVENTS AFTER THE REPORTING

PERIOD

If financial information is not complete then

that information will NOT be reliable and
relevant

Completeness requires financial statement to

reflect effects of transaction that have occurs:
a)
b)

During the accounting period

Material events after the financial year-end but before
the financial statement are authorised for issue.

FRS 110: Events after the Reporting Dates:

Post-reporting period events that may effect the
current years financial performance and position

FRS 110 defines events after the reporting date as those events,
both favourable and unfavourable, that occur between the end
of the reporting period and the date when the financial
statements are authorised for issue.
The standard has identified two types of events.
They are:
a. Those events that provide further evidence of conditions that
existed at the end of the reporting period (adjusting events), and
b. Those that are indicative of conditions that arose after the end of the
reporting period (non-adjusting events).

Date When The Financial Statements Are

Authorised For Issue

Common practice: several weeks/months after the year-end.

Due to year-end adjustment, closing the books and auditing.

Companies Act 1967: Max 6 months.

The

date on which the financial statements are authorised for

issue depends on the management structure, statutory
requirements and procedures followed by each entity in
preparing and finalising the financial statements.
Examples 1 and 2 of text book

Accounting and Reporting:

Adjusting Events

Adjusting events affect the financial position and performance

measurement of the entity even though they occurred
between the reporting date and the date the financial
statements were authorised for issue.

The accounting treatment is to adjust the elements of

financial statements affected by these events.
1) Measurement of bad and doubtful debts

Example: The bankruptcy of a customer after the reporting period

gives further evidence of the loss.
Need to adjust the carrying amount of the trade receivable.

Examples 3 & 4 of the text book

6

2) Determining the net realisable value of inventory

The measurement of net realisable value is an

estimates.
The sale of the inventory after the reporting period
gives further evidence of the selling price
Example 5

3) Court case

The entity may recognise a contingent liability.

If the court case settled after the reporting period but
before authorisation of the financial statements for
issues, the adjustment to the provision previously
recognised has to be done.
Example 6
7

4) Impairment of assets

If the entity obtain information after the reporting

period indicating that an asset is impaired at the
reporting period OR that the amount of a previously
recognised impairment loss for that asset needs to be
adjusted.

5) Cost of assets purchased or proceeds from disposal

of assets

The determination after the reporting period of the cost

of assets purcased/ the proceeds from assets sold,
before the reporting period.

6) Profit sharing or bonus

If the entity had a present legal or constructive

obligation at the reporting period to make such
payments.
The amount was determined after the reporting period
before the issue of financial statements.
Example 7

7) Fraud

The discovery of fraud or errors that shows the financial

statement are incorrect

Non-Adjusting Events
For non-adjusting events, no adjustments are made but the
following disclosure should be provided:

the nature of the event, and

the estimate of the financial effect, or a statement that

such an estimate cannot be made.

Examples of non-adjusting events:

Decline in the market value of investments after the

reporting date,
A major business combination after the reporting date
Announcing a plan to discontinue an operation, disposing of
assets etc.
Major purchases and disposals of assets or expropriation of
major assets by government.

10

Non-Adjusting Events (Contd)

Examples of non-adjusting events:

destruction of a major production plant by a fire after the

balance sheet date.

a major restructuring

Major ordinary share transactions

Changes in tax rates or tax laws

Entering into significant commitments or contingent

liabilities

Commencing major litigation arising solely out of events

that occurred after the reporting date.

Example 8 of the text book

11

Dividends and Going Concern Status

Dividends
Proposed dividends are Not present obligations and are not to
be recognised as liabilities. A disclosure is required.

Going Concern Status

Where the management determines after the reporting date
that it intends to liquidate the entity or to cease trading, or
that it has no realistic alternative but to do so, then the going
concern assumption used in preparing the financial statements
may no longer be appropriate. Financial statements are to be
prepared on a liquidation basis.

12

The standard requires an entity to disclose:

a) The date when the financial statements were
authorised for issue, who gave the authorisation.
b)

If the entitys owners or others have the power

to amend the financial statement after issue, the
entity shall disclose that fact.

c)

The information received after the reporting

period about conditions that existed at the
reporting period.

13

14