© 2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved

IAS 10 - 1© 2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.

IAS 10 (Revised 2003)IAS 10 (Revised 2003)

Events After the Balance Sheet DateEvents After the Balance Sheet Date

AUDITAUDIT

KPMG International Financial Reporting GroupKPMG International Financial Reporting Group


Objective and scopeObjective and scope

IAS (revised 2003): Applicable from 1 January 2005. Earlier application is encouraged.

The objective of the Standard is to prescribe:

When an entity should adjusts its financial statements for events after the balance sheet date.

The disclosures that an entity should give about the date when the financial statements were authorized for issue and about events after the balance sheet date.

Scope

This standard shall be applied in the accounting for, and disclosure of, events after the balance sheet date.


DefinitionsDefinitions

Events after the balance sheet date are those events, favorable and unfavorable, that occur between the balance sheet date and the date when the financial statements are authorized for issue. Two types of events can be identified:

Those that provide evidence of conditions that existed at the balance sheet date (adjusting events after the balance sheet date); and

Those that are indicative of conditions that arose after the balance sheet date (non-adjusting events after the balance sheet date).


Events after the balance sheet dateEvents after the balance sheet date

Start of the reporting period

Information made public

Financial statements authorised

Balance sheet date

Events covered by the financial

statements

Events after the balance sheet

date covered by IAS 10

Shareholdermeeting

Events after the balance sheet date

not covered by IAS 10


ExampleExample

The management of an enterprise completes draft financial statements for the year to 31 December 20X1 on 28 February 20X2. On 18 March 20X2, the board of directors reviews the financial statements and authorizes them for issue. The enterprise 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 annual meeting of shareholders approves the financial statements on 15 May 20X2 and the approved financial statements are then filed with a regulatory body on 17 May 20X2.

The financial statements are authorized for issue on 18 March 20X2 (date of Board authorization for issue).


Adjusting and non-adjusting eventsAdjusting and non-adjusting events

Adjusting events:

Provide evidence of conditions that existed at the balance sheet date

Should adjust amounts recognised in the financial statements

Non-adjusting events:

Indicate conditions that arose after the balance sheet date

Should not adjust amounts recognised in the financial statements

disclosure requirements for material non-adjusting events


Examples of adjusting events (1)Examples of adjusting events (1)

1. The settlement after the balance sheet date of a court case that confirms that the entity had a present obligation at the balance sheet date. The entity adjusts any previously recognized provision related to this court case in accordance with IAS 37 or recognizes a new provision.

2. The determination after the balance sheet date of the cost of assets purchased, or the proceeds from assets sold, before the balance sheet date.

3. The determination after the balance sheet of the amount of profit-sharing or bonus payments.

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


Examples of adjusting events (2)Examples of adjusting events (2)

5. The receipt of information after the balance sheet date indicating that an asset was impaired at the balance sheet date, or that the amount of previously recognized impairment loss for that asset need to be adjusted. For example:

The bankruptcy of a customer that occurs after the balance sheet date usually confirms that a loss existed at the balance sheet date on a trade receivable and that the entity needs to adjust the carrying amount of the trade receivable; and

The sale of inventories after the balance sheet date may give evidence about their net realisable value at the balance sheet date.


Examples of non-adjusting events (1)Examples of non-adjusting events (1)

1. Decline in market value of investments between the balance sheet date and the date when the financial statements are authorized for issue. The decline in market value does not normally relate to the condition of the investments at the balance sheet date, but reflects circumstances that have arisen subsequently. Therefore, an entity does not adjust the amounts recognized in its financial statements for the investments. However, it may need to give additional disclosure.



2. A major business combination after the balance sheet date or disposing of a major subsidiary.

3. Announcing a plan to discontinue an operation.

4. Major purchases of assets, classification of assets as held for sale in accordance with IFRS 5, other disposal of assets.

5. The destruction of a major production plant by a fire after the balance sheet date.

6. Abnormally large changes after the balance sheet in asset prices or foreign exchange rates.

7. Announcing, or commencing the implementation of, a major restructuring.



8. Changes in tax rates or tax laws announced after the balance sheet date that have significant effect on current and deferred tax assets and liabilities.

9. Commencing major litigation arising solely out of events that occurred after the balance sheet date.


Dividends and going concernDividends and going concern

Dividends

Dividends declared after the balance sheet date should not be recognised as a liability at the balance sheet date but should be disclosed in notes

If dividends are declared (ie the dividends are appropriately authorized and no longer at the discretion of the entity) after the balance sheet date but before the financial statements are authorized for issue, the dividends are not recognized as a liability at the balance sheet date because they do not meet the criteria of present obligation in IAS 37. Such dividends are disclosed in the notes (IAS 1) .


Going concernGoing concern

If the going concern assumption becomes inappropriate after the balance sheet date, the financial statements should not be prepared on a going concern basis for example:

Deterioration in operating results and financial position after the balance sheet date may indicate a need to consider whether the going concern assumption is still appropriate.


DisclosureDisclosure

Date of authorisation for issue of financial statements (FS)

Who gave authorisation

Eventual power of someone to amend the FS after issuance

Updating of disclosures about conditions existing at the balance sheet date

Material non-adjusting events:

nature of the event

an estimate of its financial effect, or that such an estimate cannot be made


Events After the Balance Sheet Date IAS 10 – Central pointsEvents After the Balance Sheet Date IAS 10 – Central points

“Cut-off” date for events after balance sheet date

date of authorisation

Adjusting events

conditions at balance sheet date

Non-adjusting events

conditions after balance sheet date

Dividends

Going concern issue

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

© 2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved.

Contact details

KPMG IFRG Limited

+44 (0)20 7694 8871

www.kpmgifrg.com

Contact details

KPMG IFRG Limited

+44 (0)20 7694 8871

www.kpmgifrg.com

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© 2005 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative. All rights reserved