AAAP7 INT
Syllabus D. Audit of Historical Financial Information D3. Evaluation and review

D3a. IAS 10 Events After The Reporting Period 35 / 41

Syllabus D3a)

Evaluate the matters (e.g. materiality, risk, relevant accounting standards, audit evidence) relating to:
xxiv) the effects of foreign exchange rates

Events can be adjusting or non-adjusting.

We are looking at transactions that happen in this period, and whether we should go back and adjust our accounts for the year end or not adjust and just put into next year’s accounts

If the event gives us more information about the condition at the year-end then we adjust.

If not then we don’t.

When is the "After the Reporting date" period?

It is anytime between period end and the date the accounts are authorised for issue.

  • After the SFP date = Between period end and date authorised for issue

Ok and why is it important?

Well it may well be that many of the figures in the accounts are estimates at the period end.

However, what if we get more information about these estimates etc afterwards, but before the accounts are authorised and published.. should we change the accounts or not?

The most important thing to remember is that the accounts are prepared to the SFP date. Not afterwards. 

So we are trying to show what the situation at the SFP date was. However, it may be that more information ABOUT the conditions at the SFP date have come about afterwards and so we should adjust the accounts. 

Sometimes we do not adjust though…

Adjusting Events

Here we adjust the accounts if:

The event provides evidence of conditions that existed at the period end

Examples are..

  1. Debtor goes bad 5 days after SFP date

    (This is evidence that debtor was bad at SFP date also)

  2. Stock is sold at a loss 2 weeks after SFP date

  3. Property gets impaired 3 weeks after SFP date

    (This implies that the property was impaired at the SFP date also)

  4. The result of a court case confirming the company did have a present obligation at the year end

  5. The settling of a purchase price for an asset that was bought before the year end but the price was not finalised

  6. The discovery of fraud or error in the year

Non-Adjusting Events - these are disclosed only

These are events (after the SFP date) that occurred which do not give evidence of conditions at the year end, rather they are indicative of conditions AFTER the SFP date

  1. Stock is sold at a loss because they were damaged post year-end 

    (This is evidence that they were fine at the year-end - so no adjustment)

  2. Property impaired due to a fall in market values generally post year end

    (This is evidence that the property value was fine at the year end - so no adjustment required).

  3. The acquisition or disposal of a subsidiary post year end

  4. A formal plan issued post year end to discontinue a major operation

  5. The destruction of an asset by fire or similar post year end

  6. Dividends declared after the year end

Non-adjusting event which affects Going Concern

Adjust the accounts to a break up basis regardless if the event was a non-adjusting event.