There may be a time gap between the balance sheet date (reporting date) and the date on which the financial statements are approved. During this gap of time, some events shall take place. Such events are called events after reporting period. For Example, a company prepares its balance sheet on 31/3/2021, but it is approved by Board of Directors on 30/6/2021. Any event that occurs between 31/03/2021 and 30/6/2021 is called event after reporting period. The main issue here is whether to adjust such events in the financial statements or not. Therefore, latest and simplified version Accounting standards related with Events after the Reporting period have been presented herewith for future discussion and summarization.
1. Following are the important Accounting Standards related with Events after the Reporting period
1. IAS 10, IFRIC17, Distributions of Non-Cash Assets to owners
2. INDAS 10
3. AS -4
2. Differences between INDAS 10 and IAS 10
| INDAS 10 | IAS 10 |
| 1. The words “Approval of the financial statements for issue have been used “ | 1. The words “Authorization of the financial statements for issue have been used “ |
| 2. Relevant terms are Statement of profit and loss and balance sheet | 2. Relevant terms are Statement of Comprehensive Income and Statement of Financial Position |
| 3. In case of breach of a material provision of a long-term arrangement on or before the end of the reporting period with the effect that the liability becomes payable on demand on the reporting date ,if the lender ,before the approval of the financial statements for issue ,agrees to waive the breach,it shall be considered as an adjusting event | 3. No such a provision |
No Major differences between INDAS 10 and IAS 10 except the above. Therefore, the following paragraphs relate to both INDAS 10 and IAS 10.
3. Objective
To prescribe:
(a) when an entity should adjust its financial statements for events after the reporting period; and
(b) the disclosures that an entity should give about the date when the financial statements were approved for issue and about events after the reporting period.
The Standard also requires that an entity should not prepare its financial statements on a going concern basis if events after the reporting period indicate that the going concern assumption is not appropriate.
4. Scope
This Standard shall be applied in the accounting for, and disclosure of, events after the reporting period.
5. Adjusting adjusting events after the reporting period and non‑adjusting events after the reporting period
Two types of events can be identified as per this standard
(a) those that provide evidence of conditions that existed at the end of the reporting period (adjusting events after the reporting period);
(b) those that are indicative of conditions that arose after the reporting period (non‑adjusting events after the reporting period).
6. Recognition and measurement
Adjusting adjusting events after the reporting period
An entity shall adjust the amounts recognised in its Statement of profit or loss, Statement of Changes in Equity and Balance sheet to reflect adjusting events after the reporting period.
Examples
a. The settlement of court case after the balance sheet date
b. The receipt of information after the reporting period indicating that an asset was impaired at the end of the reporting period
c. Determination after the balance sheet date of the consideration for assets sold or purchase before the balance sheet date
d. The discovery of fraud or errors that show that the financial statements are incorrect.
Non‑adjusting events after the reporting period
An entity shall not adjust the amounts recognised in its Statement of profit or loss , Statement of Changes in Equity and Balance sheet to reflect adjusting events after the reporting period. The entity does not update the amounts disclosed for the investments as at the end of the reporting period ,although it may need to give additional disclosure.
Dividends
Dividends declared after the balance sheet period should not be recognized as a liability at the end of the reporting period.
7. Disclosure
Disclosure of following information is needed.
a. Date when the financial statements were approved for issue and who gave that approval
b. Disclosures about conditions that existed at the end of the reporting period should be updated in the light of the new information received after the reporting period.
c. An entity should disclose the following in respect of material non-adjusting events :
– The nature of events
– An estimate of its financial effect or a statement that such an estimate cannot be made.
8. The following are examples of non-adjusting events after the reporting period that would generally result in disclosure (List not Completed)
a. A Major Business Combination after the balance sheet date
b. Disposing of a major subsidiary
c. Announcing a plan to discontinue an operation
d. The destruction of a major production plant by a fire after the reporting period
e. Abnormally large changes after the reporting period in asset prices or foreign exchange rates .
f. Changes in taxes ,or tax laws enacted, or announced after the balance sheet date .
9. Covid Related Amendments
On 24th July, 2020 the Ministry of Corporate Affair (MCA) vide notification dated 24th July, 2020 has amended this standard as follows:-
For paragraph 21, the following shall be substituted, namely:- ―21 If non-adjusting events after the reporting period are material, non-disclosure could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.
Author Bio
A company say XYZ changed its name as ABC, which is approved by MCA in July 2021. The statutory audit of the Company for the year ended 31.3.2021 was completed & the financial statements are approved by the Board in September 2021. The balance sheet, Audit Report etc. for the year ended 31.3.2021 are in the new name i.e. ABC though the name change is approved in July 2021 only. Is it necessary to disclose the name change in Audit Report, Notes on Accounts etc. for the period ended 31.3.2021?