The objective of FRS 10 is to prescribe the accounting and disclosure requirements of events after the balance sheet date. Events after the balance sheet date refer to those events that occur between the balance sheet date and the date when the financial statements are authorised for issue.
Adjusting events provide evidence of conditions that existed at the balance sheet date. Examples of adjusting events include:-
- the settlement after the balance sheet date of a court case that confirms that the entity had a present obligation at balance sheet date;
- the awareness of information after the balance sheet date pertaining to the impairment of an asset impaired at the balance sheet date (eg. knowledge of customer’s bankruptcy after balance sheet date warrants an adjustments to be made to the receivable from customer at balance sheet date and sale of inventories below cost after the balance sheet date)
Non-adjusting events reflect conditions that arise only after the balance sheet date.
Examples of non-adjusting events include:-
- a decline in market value of investments subsequent to balance sheet date and before date financial statements are authorized for issue;
- dividends declared after the balance sheet date.
Refer to FRS 10 for more examples of non-adjusting events.
For non-adjusting events, the entity discloses the nature of the event and an estimate of its financial effect.
Financial statements should not be prepared on a going concern basis if management determines after the balance sheet date that it intends to liquidate the entity or to cease trading.
Financial statements should disclose the date when the financial statements were authorized for issue and who gave that authorisation.
Source – eICPAS newsletter May 2009