An insight to IND AS 10 - Events After the Reporting Period


1. To understand any accounting standard in a better way, it is of most importance to know the objective of the standard. Objectives primarily cover key areas which standard address and reason why standard came into existence.

Objective of Ind AS-10:

  • To prescribe when entity adjust its financial statements (FS) for events after the reporting period
  • To disclose the date when FS was approved and events after the reporting date

2. To know about coverage/applicability of standard you should look into the scope of it. Ind AS-10 is applicable to accounting and disclosure of events after the reporting date.

3. Definitions

Events after the reporting period: are those favorable and unfavorable events that occur between the end of the reporting period and the date when FS are approved. Two types of events can be identified:

  1. Adjusting Events: are those that provide evidence of the condition that existed at the end of the reporting period
  2. Non-adjusting Events: are those that are indicative of the condition that arose after the reporting period.
  1. Breach of material provision of a long term loan arrangement (like default in repayment or shortage of primary security) on or before the end of the reporting period is always an adjusting event even if lender agrees not to demand repayment.
  2. In some organizations, FS first approved by the management then further approved by supervisory management or top management, date of approval shall be the date when FS was first approved by management.
  3. Entity shall adjust its FS to reflect adjusting events after the reporting period.
  4. Following are example of adjusting events:
    • Existence of a present obligation of a court case at the end of the reporting period.
    • Information received after end of the reporting period that asset was impaired at the end of the reporting period.
    • Discovery of any fraud or error that shows that FS is incorrect.
  5. Effect of non-adjusting events after the reporting period should not be made in FS.
  6. If non-adjusting events after the reporting period is material, then it is mandatory to give its disclosure.
  7. Following are the example of non-adjusting events after reporting period which generally calls for disclosure
    1. Major business combination
    2. Plan for discontinuation of operations
    3. Major purchase of assets
    4. Destruction of major production plants by fire
    5. Announcement or commencement of major restructuring
    6. Abnormal changes in assets prices or foreign exchange held
    7. Significant changes in tax rates
    8. Significant commitments or material contingent liabilities
    9. Commencing major litigations
  8. Dividend declared after the reporting period should not be recognized as a liability at the end of the reporting period (reason being, dividends do not meet the criteria of a present obligation as per Ind AS-37, Provisions Contingent Liabilities and Contingent Assets   
  9. Entity shall not prepare its FS on a going concern basis if management after the reporting period has the intention to liquidate the entity or to cease trading. If going concern assumption is not appropriate then it affects is so pervasive that it calls for fundamental change in the basis of accounting, rather than an adjustment to the amounts recognized.

Disclosures:

Date when FS was approved for issue, who gave the approval. If owners or others have the power to amend the FS after issue, the entity shall disclose this fact.

The author can also be reached at cakushalsoni@gmail.com

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CA Kushal Soni 
on 23 March 2019
Published in Accounts
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