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Introduction: The intricacies of financial reporting are many, but few areas are as nuanced and critical as dealing with events after the reporting period. Indian Accounting Standard (Ind AS) 10 is a cornerstone in this arena, offering detailed guidance on how entities should adjust their financial statements for events that occur after the reporting period has ended. This article delves into the essence of Ind AS 10, its requirements for adjusting and disclosing events, and the implications for financial statements and decision-making.

Ind AS 10, Events after the Reporting Period, aims to guide entities on adjusting their financial statements for events occurring after the reporting period and the necessary disclosures regarding the approval date and subsequent events. The standard emphasizes the importance of not preparing financial statements on a going concern basis if events indicate that this assumption is inappropriate. 

  • Events after Reporting Period: 
  • Adjusting Events: These events provide evidence of conditions existing at the end of the reporting period. For example, the discovery of new information regarding the valuation of assets or liabilities at the reporting date. 
  • Non-adjusting Events: These events indicate conditions arising after the reporting period. An exception is made for a breach of a material provision of a long-term loan arrangement where the lender agrees not to demand payment; this is considered an adjusting event. 
  • Adjustments in Financial Statements: 
  • Adjusting events require adjustments to be made in the financial statements to reflect the updated information. 
  • Non-adjusting events do not result in adjustments but may require disclosure if their non-disclosure could impact decision-making. 
  • Disclosure of Non-adjusting Events: 
  • If non-adjusting events are material, disclosure is required, including the nature of the event and an estimate of its financial effect or a statement that such an estimate cannot be made. 
  • This disclosure is essential for assisting users of financial statements in making informed decisions. 
  • Update of Disclosures: 
  • If an entity receives information after the reporting period about conditions that existed at the end of the reporting period, it should update related disclosures based on the new information. 
  • Appendix A – Distribution of Non-cash Assets as Dividends: 
  • The appendix provides guidance on recognizing liabilities for non-cash dividends when appropriately authorized and no longer at the entity’s discretion. 
  • The liability should be measured at the fair value of assets to be distributed, and any difference between the carrying amount of assets distributed and the carrying amount of the dividend payable is recognized in profit or loss upon settlement. 

Conclusion: Ind AS 10 plays a pivotal role in ensuring that financial statements accurately and transparently reflect an entity’s financial position, considering events that occur after the reporting period. By distinguishing between adjusting and non-adjusting events and outlining specific disclosure and adjustment requirements, Ind AS 10 enhances the reliability of financial statements, aiding users in making informed decisions. Entities must diligently apply the standard to uphold the principles of accuracy and transparency in financial reporting.

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I'm Shivprasad Devidasrao sakhare, a Chartered Accountant, and here, we dive into the intricate world of finance, taxation, and all things accounting. Join me on a journey of demystifying the complexities, sharing practical insights, and making the world of numbers more approachable. Whether you' View Full Profile

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April 2024