Recommendation

The researchers have realized the conclusion that it hoped to answer and so the
recommendation for the topic of Events after the Reporting Period is the next thing to do.
Conducting a thorough study the researchers have arrived in the following findings and
recommendations, springing from different point of views of the various practitioners and
companies concerned in the said area of expertise. Furthermore, some illustrations are presented
such that as examples in certain parts of the report which may help the readers to fully
understand the discussion at hand. Some of the recommendations are adapted or the excerpt of
the above mentioned people as to enhance the credibility and the reliance of the readers in the
synthesis or the paper work performed and documented. Thus here are the following
recommendations:
1. Upgrading the practice of accountancy in recognizing the IAS 10 or the Events
after the Reporting Period
In October 2012, the Committee received a request for guidance on the
accounting implications of applying IAS 10 when previously issued financial statements
are reissued in connection with an offering document. The Committee was asked to
clarify whether IAS 10 permits only one date of authorization for issue when considered
in the context of reissuing previously issued financial statements in connection with an
offering document.

The staff proceeded to provide background information and analysis on the issue
rose in the submission and made a recommendation that the Committee should propose
an amendment to IAS 10.
The staff focused on the securities laws and regulatory practices in certain
jurisdictions, which require an entity to reissue its previously issued audited annual
financial statements in connection with an offering document when the most recently
filed interim financial statements, reflect matters that are accounted for retrospectively
under the applicable accounting standards. For example, an entity that issues IFRS
financial statements will reissue its previously issued annual financial statements if it, for
example, is issuing an offering document in North America markets.
In these jurisdictions an entity in its reissued financial statements does not
recognize events or transactions occurring between the date on which the financial
statements were first issued and the time the financial statements were reissued, unless
the adjustment is required by national regulation. This approach is called dual dating,
because the financial statements include two dates: the date when financial statements
were issued and the date when the financial statement were reissued.
The issue that exists is whether IAS 10 permits only one date of authorization for
issue (i.e., dual dating is not permitted) when considered within the context of reissuing
previously issued financial statements in connection with an offering document.
The staff noted that two views exist in practice; namely that dual dating is
not permitted under IAS 10 and dual dating is permitted under IAS 10. In presenting their

recommendation to the Committee, the staff took into consideration the scope of IAS 10
and that implicit in IAS 10 is that the financial statements can have only one date of
authorization for issue. The staff considered if a new set of financial statements
supersedes the previously issued set of financial statements, the investors will want to
know about any adjusting and non-adjusting events occurring up to the new date of
authorization for issue.
The staff concluded that the Committee should propose an amendment to IAS 10
in order to clarify that if an entity reissues a new set of financial statements that
supersedes the previously issued set, then this entity should in the new set of financial
statements account for any adjusting events and disclose any non-adjusting events that
have occurred between the previous date that the financials were authorized for issue and
the new date the financial statements were authorized for issue.
The Committee in their discussions noted the key driver of this amendment was
the securities regulators. Several Committee members discussed the implications of not
amending IAS 10 and issuing Pro-forma or General Purpose financials with offering
documents, however the majority of the Committee members noted that where possible,
the quality that IFRS financial statements affords, should be something that is extended to
the situations where financial statements are reissued for the purpose of offering.
Several Committee members reiterated the point that IAS 10 is inextricably linked
to the concept of accounting for any adjusting events and disclose any non-adjusting
events.

One Committee member talked about the reissue of financial statements in the
context of offering as the problem for the regulators and how IAS 10 could not
encompass a one size fits all solution to the scope and breadth of regulation in the
global capital markets.
In the interests of time, the Chair summarized the key arguments tabled. The first
being that if regulatory rules are being brought into IFRS, then the staff analysis seems to
be the right approach, however the second key argument was to do nothing and leave in
the realm of the regulator since the issue of dual dating was not for IFRS to deal with. A
vote was taken and it was decided to do nothing, however the Chair made the suggestion
that any reflections would be welcomed at the proceeding Committee meeting.
2. Updating disclosure about conditions at the end of the reporting period
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. An entity shall update the disclosures,
irrespective of any adjustments made to the amounts that are recognized in its financial
statements.
Example:
An entity has a contingent liability in its financial statements on 31 March 2012.
The evidence is available relating to this contingent liability after the reporting period and
before the approval of the financial statements. In addition to considering whether the

entity should recognize a provision as per the standard, the entity should update its
disclosures about the contingent liability in the light of that evidence.
Non-adjusting events after the reporting period
If non-adjusting events after the reporting period are material, non-disclosure
could influence the economic decisions that users make on the basis of the financial
statements. Accordingly, an entity shall disclose the following for each material category
of non-adjusting event after reporting period:

The nature of the event; and

An estimate of its financial effect or a statement that such an estimate cannot be

made.

Example:
ABC Ltd closed its financial statements on 31 December 2011. On 1 January
2012, an office building with a net book value of 100 was severely damaged by
earthquake. It is expected that the insurance company will compensate for the claim but
still the proceed will fall short by 50. The company needs to give disclosure regarding
this non-adjusting event specifying its nature as well as an estimate of the financial effect.
Example:
ABC Ltd is having negotiations with the government for the expropriation of a
plot of land by the latter on which a part of the factory is situated. The financial effect of

this has to be disclosed in the notes. If an estimate of its financial effect cannot be made,
disclosure should be made through a statement.
The following are examples of non-adjusting events after reporting period that
would generally result in disclosure:

A major business combination or disposing of a major subsidiary after the end of

the reporting period and before the authorization date.

Example:
ABC Ltd closes its financial statements on 31 December 2011. On 17January
2012, the company announced its intension to acquire XYZ Ltd for a consideration of
100. The transaction is yet to be approved by ABC Ltd.s shareholders. The acquisition is
expected to be completed by the end of September 2012. This is a non-adjusting event
which needs to be disclosed.

Announcing a plan to discontinue an operation;

Major purchases of assets, classification of assets as held for sale in accordance

with IFRS 5, other disposals of assets, or expropriation of major assets by
governments;

The destruction of major production plant by a fire after the reporting period;

Announcing, or commencing the implementation of, a major restructuring as per

IAS 37;
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Major ordinary share transactions and potential ordinary share transactions after
the reporting period;

3. 24: EVENTS AFTER THE END OF THE REPORTING PERIOD

24.1 Section 32 of FRS 102 deals with events after the end of the reporting period.

24.2 Institutions are required to identify events, favorable and unfavorable, that occur
between the end of the reporting period and the date when the financial statements
are authorized for issue and make adjustments or disclosures where these are
material to the understanding of the financial statements.

24.3 Two types of events can be identified:

Adjusting events are those that provide evidence of conditions that existed at the
end of the reporting period, for example information that indicates an asset was
impaired at the period end; and

Non-adjusting events are those that indicate conditions that arose after the end of
the reporting period, for example a decline in the market value of investments
between the period end and the date when the financial statements are authorized
for issue. Whilst adjusting events will result in changes to assets or liabilities
included in the financial statements, non-adjusting events only result in
disclosure.

24.4 An adjusting event arises where a present obligation to pay gift aid exists at the
period end, normally through a board minute of the subsidiary. In such
circumstances the value of the gift aid payment may be adjusted after the Balance
Sheet date to provide greater accuracy in the measurement of the existing asset
within the institutions Balance Sheet.

24.5 The institution shall disclose the date when the financial statements were authorized
for issue and who gave that authorization. Further disclosure requirements are set
out in paragraphs 32.9 to 32.11 of FRS 102.

4. Assessing Events after the Balance Sheet Date

As an auditor, you must address all relevant events that take place after the
balance sheet date but before you issue your report. For example, your audit client may
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be breathing a sigh of relief because a warehouse fire or a product liability lawsuit

occurred after the balance sheet date. The client may assume an event like that doesnt
have to be included in this years audit report, but thats not necessarily true. This section
gives you the lowdown on what types of events you may encounter, how to look for
them, and how to know which ones are important.
When doing an audit, two types of subsequent events require your attention.
Following is a breakdown of these two types.

Type I events: These events affect your clients accounting estimates and are on the
books (but not confirmed) as of the balance sheet date. A good example is the clients
estimate for uncollectible accounts. This estimate is on the books at the balance sheet
date, but your client cant be sure of the estimates resolution until a subsequent
event occurs, such as a customer filing for bankruptcy. At that point, your client
confirms that the amount is actually uncollectible.
If the confirming event (such as the bankruptcy) occurs after the balance sheet date
but before the financial statements is finalized, your client has to adjust its financial
statements. It zeroes out the allowance for uncollectible accounts relative to this
customer and reduces accounts receivable for the same amount.

Type II events: These events, also called non-recognized events, arent on the books
before the balance sheet date and have no direct effect on the financial statements
under audit. The purchase or sale of a segment of the company, losses due to a fire or
flood, and big sales of stock all fall into this category.

If these events are material (that is, their inclusion or exclusion may cause a
reasonable person to change his opinion about the information), they have to be
disclosed as footnotes in the financial statements (and you may even want to add a
paragraph to your report explaining the situation), but the financial statements dont
have to be adjusted.
If a Type II event is significant enough that the financial statements may be
misleading to users, you need to prepare pro forma financial information that is,
information that reflects how the financial statements would have looked if the event
had taken place before the balance sheet date. The pro forma information is
supplemental in nature, meaning that you usually add it to the financial statements as
a schedule or footnote.

So what type of event is important enough to require either disclosure or pro forma
treatment? With experience, youll be able to apply your professional judgment to make that
evaluation. When you first start working as an auditor, rely on your audit supervisor for help with
this question.

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