Q4 - Reading 10.1

IAS 10 - Events After the Reporting Period

IAS 10 prescribes when an entity should adjust financial statements for events after the reporting period and related disclosures.

Key Definitions

• Events After the Reporting Period: Events, both favorable and unfavorable, occurring between the end of the reporting period and the date the financial statements are authorized for issue.

• Adjusting Events: Events providing evidence of conditions that existed at the end of the reporting period.

• Non-Adjusting Events: Events indicative of conditions that arose after the reporting period.

Going Concern

Financial statements should not be prepared if the entity is no longer a going concern due to events after the reporting period (IAS 10.1).

Disclose if financial statements are not prepared on a going concern basis or if material events cast doubt on the entity’s ability to continue (IAS 10.16).

Assessment Steps for Events After the Reporting Period

1. Going Concern Verification: Ensure the going concern assumption is still appropriate (IAS 10.15).

2. Time of Occurrence Identification: Determine if the event occurred between the end of the reporting period and the date of authorization for issue.

3. Type of Event Determination: Classify the event as adjusting or non-adjusting.

   • Adjusting Events: Adjust financial statements.

   • Non-Adjusting Events: Disclose if material (IAS 10.21).

4. Materiality Verification for Non-Adjusting Events: Consider the impact on economic decisions of users of financial statements.

5. Management's Actions:

   • For non-adjusting events, disclose the nature of the event and an estimate of its financial effect, or state that such an estimate cannot be made (IAS 10.21).

COVID-19 as an Event After the Reporting Period

• Generally considered a non-adjusting event because the development and spread occurred after the reporting period (PwC, KPMG).

• If information is received after the reporting period about conditions that existed at the end of the reporting period, update disclosures (IAS 10.19).

Cut-Off Principle

Transactions should be recorded in the accounting period in which they occurred.