IAS 10 - Events after the reporting period

IAS 10, also known as International Accounting Standard 10, deals with events that occur after the balance sheet date but before the financial statements are authorized for issue. These events are important because they can provide additional information about the financial position of the entity and may require adjustments to the financial statements.

Here's an explanation of key concepts covered under IAS 10:

1. Definition of Events After the Balance Sheet Date:
• These are events that occur between the balance sheet date (the end of the reporting period) and the date when the financial statements are authorized for issue. The balance sheet date is the date as of which the financial position (assets, liabilities, and equity) is measured.
2. Two Types of Events:
• Adjusting Events: These are events that provide further evidence of conditions that existed at the balance sheet date. If an adjusting event occurs, the entity adjusts the amounts recognized in its financial statements to reflect this new information. Adjusting events typically require adjustments to the financial statements and are reflected in the financial statements as if they had occurred at the balance sheet date.
• Non-Adjusting Events: These are events that are indicative of conditions that arose after the balance sheet date and do not affect the amounts recognized in the financial statements. Non-adjusting events may require disclosure in the financial statements to provide users with relevant information about the entity's financial position, performance, and potential risks.
3. Examples of Adjusting Events:
• Settlement of a court case that confirms a liability existed at the balance sheet date.
• Discovery of new information about the value of assets or liabilities that existed at the balance sheet date.
• Bankruptcy of a customer that occurred shortly after the balance sheet date but confirms that a receivable is impaired at the balance sheet date.
4. Examples of Non-Adjusting Events:
• Natural disasters occurring after the balance sheet date.
• Major business combinations or disposals of assets after the balance sheet date.
• Changes in market prices or interest rates after the balance sheet date.
5. Disclosure Requirements:
• IAS 10 requires disclosure of the nature of each significant adjusting and non-adjusting event after the balance sheet date. For adjusting events, entities disclose the impact of those events on the financial statements. For non-adjusting events, entities disclose the nature of the event and an estimate of its financial effect or state that such an estimate cannot be made.
6. Date of Authorization for Issue:
• Financial statements are authorized for issue when they are approved for issue by management and, where applicable, the board of directors. This date determines the cut-off for events to be considered in the financial statements.

In summary, IAS 10 ensures that financial statements provide relevant and reliable information by addressing events that occur between the balance sheet date and the date when financial statements are authorized for issue. It distinguishes between adjusting events that require changes to the financial statements and non-adjusting events that may require disclosure to help users assess the entity's financial position and performance.