HKAS 10 - Events after the Reporting Period (Condensed)

Objective and Scope

Primary Objective

HKAS 10 prescribes:

• When an entity should adjust its financial statements for events occurring after the reporting period but before authorisation for issue.
• Disclosures about the date of authorisation and events after the reporting period.
• Going concern assessment: The entity shall not prepare financial statements on a going concern basis if events after the reporting period indicate the assumption is inappropriate.

Scope

This Standard applies to the accounting for, and disclosure of, events after the reporting period.

Definitions

Events after the Reporting Period

Events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue.

Two Types

Date of Authorisation for Issue

The financial statements are authorised for issue on the date of issue, not the date when shareholders approve the financial statements. Events after the reporting period include all events up to the date of authorisation.

Adjusting Events after the Reporting Period

Rule

An entity shall adjust the amounts recognised in its financial statements to reflect adjusting events after the reporting period.

Examples (Paragraph 9)

• Settlement of a Court Case: Confirms a present obligation at period-end; adjust provision or recognise new provision.
• Receipt of Information about Asset Impairment: e.g., bankruptcy of a customer after period-end confirms credit impairment at period-end; sale of inventories gives evidence of net realisable value.
• Determination of Cost or Proceeds: For assets purchased or sold before period-end.
• Profit-sharing or Bonus Payments: If a present obligation existed at period-end.
• Discovery of Fraud or Errors: Shows financial statements are incorrect.

Non-adjusting Events and Dividends

Non-adjusting Events

An entity shall not adjust amounts recognised to reflect non-adjusting events.

Dividends

If dividends are declared after the reporting period but before authorisation, the entity shall not recognise them as a liability at period-end because no obligation exists at that time. Such dividends are disclosed in the notes (HKAS 1).

Going Concern

Rule

An entity shall not prepare its financial statements on a going concern basis if management determines after the reporting period either that:

• It intends to liquidate the entity or to cease trading, OR
• It has no realistic alternative but to do so.

HKAS 1 specifies required disclosures if financial statements are not prepared on a going concern basis or if material uncertainties exist.

Disclosure Requirements

Date of Authorisation for Issue (Paragraph 17)

Disclose:

• The date when the financial statements were authorised for issue
• Who gave that authorisation
• If owners or others have the power to amend after issue, disclose that fact

Updating Disclosure about Conditions at Period-end (Paragraph 19)

If information is received after the reporting period about conditions that existed at period-end, update disclosures in light of the new information (e.g., contingent liability).

Non-adjusting Events (Paragraph 21)

If material, disclose for each category:

• The nature of the event
• An estimate of its financial effect, OR a statement that such an estimate cannot be made

Examples Requiring Disclosure (Paragraph 22)

• Major business combination after period-end
• Announcing a plan to discontinue an operation
• Major purchases of assets or classification as held for sale
• Destruction of a major production plant by fire
• Major restructuring
• Major ordinary share transactions
• Abnormally large changes in asset prices or foreign exchange rates
• Changes in tax rates or tax laws
• Significant commitments or contingent liabilities
• Major litigation arising solely from events after period-end

Effective Date and Transition

Effective Dates

Withdrawal

This Standard supersedes SSAP 9 Events After the Balance Sheet Date (revised in 2001).

Key Takeaways Summary

Key Takeaways Summary

Summary Table