Reporting Period (IAS 10) 1 This material is the property of Department of Accounting and Finance, CoBE, AAU. Permission must be obtained from
Types of events after the
reporting period the broad principles
Those events, favourable and unfavourable,
that occur between the end of the reporting period and the date when the FSs are authorised for issue.
Date of Authorization for issue
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 and approves the financial statements. 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. What is Date of Authorization for issue? 4
Types of events after the
reporting period the broad principles
Adjusting eventsthose that provide
evidence of conditions that existed at the end of the reporting period
adjust the amounts recognised in financial
statements
Non-adjusting eventsthose that are
indicative of conditions that arose after the end of the reporting period
do not adjust the amounts recognised in its
financial statements; disclose the nature of the event and its financial effect
Event after the reporting period:
what do you think?
On 15 March 2016 when the entitys financial
statements were authorised for issue, the spot exchange rate = ETB22:$1.
At 31 December 2015 the spot exchange rate =
ETB21:$1.
At what amount must the entity (functional currency =
ETB) measured its $100 million unhedged noncurrent liability in its 31 December 2015 statement of financial position? Choose one of: 1)
ETB2,100 million (non-adjusting event)
2)
ETB2,200 million (adjusting event)
Event after the reporting period:
what do you think?
ABEBA Ltd. decided to operate a new Ethanol
Manufacturing Unit that will cost ETB1 million to build in the year 2005. Its financial year-end is December 31, 2005. ABEBA Ltd. has applied for a letter of guarantee for ETB700,000 to import machineries and equipment. The letter of guarantee was issued on March 31, 2006. The audited financial statement have been authorized to be issued on April 18, 2006. The adjustment required to be made to the FSs for the year ended December 31, 2005, should be:
a) b)
c) d)
Booking a ETB700,000 long-term payable.
Disclosing ETB700,000 as a contingent liability in 2005 financial statement. Increasing the contingency reserve by ETB700,000. Do nothing.
Event after the reporting period:
what do you think?
Excellent Inc. built a new factory building
during 2005 at a cost of ETB20 million. At December 31, 2005, the net book value of the building was ETB19 million. Subsequent to year-end, on March 15, 2006, the building was destroyed by fire and the claim against the insurance company proved futile because the cause of the fire was negligence on the part of the caretaker of the building. If the date of authorization of the FSs for the year ended December 31, 2005, was March 31, 2006.
Event after the reporting period:
what do you think?
Event after the reporting period:
what do you think?
On December 31, 2005 Excellent Inc. should
a) Write off the net book value to its scrap value because the insurance claim would not fetch any compensation. b) Make a provision for one-half of the net book value of the building. c) Make a provision for three-fourths of the net book value of the building based on prudence. d) Disclose this non-adjusting event in the footnotes.
Event after the reporting period:
what do you think?
At the balance sheet date, December 31, 2015,
ABC Inc. carried a receivable from XYZ, a major customer, at ETB10 million. The authorization date of the financial statements is on February 16, 2016. XYZ declared bankruptcy on February 14, 2016.
Event after the reporting period:
what do you think?
ABC Co. will:
a) Disclose the fact that XYZ has declared bankruptcy in the footnotes. b) Make a provision for this postbalance sheet event in its financial statements (as opposed to disclosure in footnotes). c) Ignore the event and wait for the outcome of the bankruptcy because the event took place after the year-end. d) Reverse the sale pertaining to this receivable in the comparatives for the prior period and treat this as an error under IAS 8.