People working in Accounts, Finance and Audit field should have a clear understanding regarding subsequent events of the financial statement. Subsequent events of financial statements, or events after reporting period, or events after balance sheet date represents the same meaning and there is no difference. This article prepares to remove the confusion of individuals such as Employee, students and to build a clear understanding of subsequent events.
The concept of Events After Balance Sheet Date
“Events after the reporting period state the events which are occurred after the Balance sheet date. These events may occur between the end of the reporting period and the authorization date of financial statements for the issue “
Balance sheet date and Reporting period dates are the same. Events after reporting period are some information which is related to the current period which should be considered for preparation of financial statements.
IAS – 10 Events after the Reporting period provides guidelines regarding the events which should be adjusted in the financial statements and should be disclosed in the notes to the financial statements.
Authorization date for issue
Events after the reporting period occur between reporting date/ balance sheet date and the date when the financial statements are authorized for issue. The Board of Directors of the company usually authorize the financial statements in its Board of Directors meeting and the date when the meeting is held to authorize the financial statements for the issue is the Authorization Date for the issue.
Adjusting and Non-Adjusting Events
- Events after the reporting period: Whether favorable or unfavorable which is occurred between the end of the reporting and the date that the financial statements are authorized for issue.
- Adjusting Events: Those events provide further evidence about conditions that existed at the end of the reporting period.
- Non-Adjusting Events: Those events that reflect conditions that arose after the end of the reporting period. Say, for example, a dividend declared after the reporting period is a non-adjusting event.
The relationship between “Going Concern assumption” and ” Event after balance sheet date”
When this is observed from the events after the reporting period that the entity shall not be able to continue as a going concern, the entity shall not prepare its financial statements on the going concern basis. In this regard whether such events are arising after the end of the reporting period or not shall be considered.
If the financial statement is not prepared on the going concern basis, it shall be disclosed the fact in the financial statements along with some major uncertainties that may indicate its going concern problem.
An entity shall disclose the date when the financial statements were authorized to issue and who authorized that. If the entity’s owners or others have the power to amend the financial statement after issue, the entity shall disclose the fact. The users of financial statements should know the date when the financial statement was authorized to issue, because the financial statements don’t reflect events after this date.
If an entity receives information after the reporting period about conditions that existed at the end of the reporting period, it shall update disclosures that relate to those conditions, in the light of the new information. Say for example, When evidence becomes available after the reporting period about a contingent liability that existed at the end of the reporting period. In addition to considering whether it should recognize or change a provision under IAS 37, Provisions, Contingent Liabilities and Contingent Assets, an entity update its disclosures about the contingent liability in the light of that evidence.
Finally, IAS 10 Events after the Reporting Period guided when an entity should adjust its financial statements for events after the reporting period and prescribed the disclosure that an entity should present in the financial statement when the financial statements are authorized for issue.