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Chapter 4 Events After Reporting Period

This document discusses accounting for events after the reporting period. It defines events after the reporting period as those occurring between the reporting date and the date the financial statements are authorized for issue. There are two types of post-reporting events: adjusting events that provide evidence of pre-reporting conditions, and non-adjusting events that arise after the reporting period but may require disclosure. Examples of each type are provided. Financial statements must disclose the authorization date, any adjusting events, and material non-adjusting events.

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67 views2 pages

Chapter 4 Events After Reporting Period

This document discusses accounting for events after the reporting period. It defines events after the reporting period as those occurring between the reporting date and the date the financial statements are authorized for issue. There are two types of post-reporting events: adjusting events that provide evidence of pre-reporting conditions, and non-adjusting events that arise after the reporting period but may require disclosure. Examples of each type are provided. Financial statements must disclose the authorization date, any adjusting events, and material non-adjusting events.

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CAE06-Intermediate Accounting 3/ FA Stockholders’ Equity and Other Special Topics

CHAPTER 4 EVENTS AFTER REPORTING PERIOD

Learning Objectives
 Define events after the reporting period.
 State the accounting requirements for events after the reporting
period.

 Events after the Reporting Period


Events after the reporting period are “those events, favorable or unfavorable,
that occur between the end of the reporting period and the date that the
financial statements are authorized for issue.” (PAS 10)

 Two types of events after the reporting period


1. Adjusting events after the reporting period – are those that provide
evidence of conditions that existed at the end of the reporting period.
2. Non-adjusting events after the reporting period – those that are
indicative of conditions that arose after the reporting period

 Date of authorization of the financial statements


This date is the date when management authorizes the financial statements for
issue regardless of whether such authorization for issue is for further approval
or for final issuance to users.

 Examples of adjusting events:


1. The settlement after the reporting period of a court case that confirms that
the entity has a present obligation at the end of reporting period.

2. The receipt of information after the reporting period indicating that an asset
was impaired at the end of reporting period. For example:

1
CAE06-Intermediate Accounting 3/ FA Stockholders’ Equity and Other Special Topics

i. The bankruptcy of a customer that occurs after the reporting period may
indicate that the carrying amount of a trade receivable at the end of
reporting period is impaired.
ii. The sale of inventories after the reporting period may give evidence to
their net realizable value at the end of reporting period

3. The determination after the reporting period of the cost of asset purchased,
or the proceeds from asset sold, before the end of reporting period.

4. The discovery of fraud or errors that indicate that the financial statements
are incorrect.

 Examples of non-adjusting events normally requiring disclosures:


a. Changes in fair values, foreign exchange rates, interest rates or market
prices after the reporting period.
b. Casualty losses (e.g., fire, storm, or earthquake) occurring after the
reporting period but before the financial statements were authorized for
issue.
c. Litigation arising solely from events occurring after the reporting period.
d. Major ordinary share transactions and potential ordinary share
transactions after the reporting period.
e. Major business combination after the reporting period.
f. Announcing a plan to discontinue an operation after the reporting period.
g. Declaration of dividends after the reporting period

 Disclosures
a. Date of authorization for issue
b. Adjusting events
c. Material Non-adjusting events

Reference

INTERMEDIATE ACCOUNTING 3
Zeus Vernon B. Millan, CPA
Lecture Notes of Compilation of Dean Rene Boy R. Bacay, CPA, CrFA, CMC, MBA, FRIAcc

For further discussion please refer to the link provided:

Chapter 4-EVENTS AFTER REPORTING PERIOD-[Link]

Chapter 4- Adjusting and Non-Adjusting Events after Reporting Date-[Link]

Chapter 4-Date of Authorization of AFS-[Link]

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