CHAPTER 13 – PAS 10

Events after the reporting period

EVENTS AFTER THE REPORTING PERIOD

PAS 10, paragraph 3, defines events after the reporting period as those events, whether favorable or
unfavorable, that occur between the end of reporting period and the date on which the f inancial
statements are authorized for issue.

Events after the reporting period are also known as subsequent events.

Such events may require either adjustment or disclosure.

Types of events after the reporting period

a. Adjusting events after the reporting period are those that provide evidence of conditions that
exist at the end of reporting period.
b. Nonadjusting events after reporting period are those that are indicative of conditions that arise
after the end of reporting period.

It is appropriate to adjust the financial statements for all events that offer clarity concerning the
conditions that existed at the end of reporting period and that occur prior to the date the financial
statements are authorized for issue.

Accordingly, an entity must adjust the amounts recognized in the financial statements for adjusting
events that provide evidence of conditions that existed at the end of reporting period.

However, an entity does not recognize events after the reporting period that relate to conditions that
only arose after the reporting period.

The entity is required only to disclose significant

nonadjusting events.

Examples of adjusting events

Examples of adjusting events after the reporting period which require the entity to adjust the financial
statements are:

1. Settlement after the reporting period of a court case because it confirms that the entity already
had a present obligation at the end of reporting period.
2. Bankruptcy of a customer which occurs after the reporting period.
3. Sale of inventories after the reporting period may give evidence about the net realizable value at
reporting date.
4. The determination after the reporting period of the cost of asset purchased or the proceeds from
asset sold before the end of reporting period.
5. The determination after the reporting period of the profit sharing or bonus payment if the entity
has the present obligation at the end of reporting period to make such payment.
 6. The discovery of fraud or errors that show the financial statements were incorrect.

Examples of nonadjusting events

1. Business combination after the reporting period

2. Plan to discontinue an operation
3. Major purchase and disposal of asset or expropriation of major asset by government
4. Destruction of a major production plant by a fire after the reporting period
5. Major ordinary share transactions and potential ordinary share transactions after the reporting
period
6. Announcing or commencing the implementation of a major restructuring
7. Abnormally large changes after the reporting period in asset prices or foreign exchange rates
8. Entering into significant commitments or contingent liabilities, for example, by issuing
guarantees
9. Commencing major litigation arising solely from events that occurred after the reporting period
10. Change in tax rate enacted or announced after the end of reporting period that has a significant
effect on current and deferred tax asset and liability

Financial statements are authorized for issue when the board of directors reviews the financial
statements and authorizes them issue.

In some cases, an entity is required to submit the financial statements to the shareholders for approval
after the financial statements have been issued.

SOURCE/S:

CONCEPTUAL FRAMEWORK AND ACCOUNTING STANDARDS 2019 EDITION (VALIX)

-Vince Pereda