HKAS 10 - Events after the Reporting Period

HKAS 10 - Events after the Reporting Period

1. Objective of HKAS 10

The primary objective of HKAS 10 is to prescribe:

(a) When an entity should adjust its financial statements for events that occur after the reporting period but before the financial statements are authorised for issue.

(b) The disclosures that an entity should provide about:

(c) Going concern assessment: The Standard requires that an entity shall 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.

2. Scope

HKAS 10 shall be applied in the accounting for, and disclosure of, events after the reporting period.

3. Definitions (Critical)

Events after the Reporting Period

Definition: Events after the reporting period are those 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 of events can be identified:

Date of Authorisation for Issue

The process involved in authorising the financial statements for issue will vary depending upon:

Key Principle: The financial statements are authorised for issue on the date of issue, not the date when shareholders approve the financial statements.

Example 1 (from Standard):

Authorisation date = 18 March 20X2 (date of board authorisation for issue)

Example 2 (Supervisory Board):

Authorisation date = 18 March 20X2 (date of management authorisation for issue to supervisory board)

Important: Events after the reporting period include all events up to the date when the financial statements are authorised for issue, even if those events occur after the public announcement of profit or of other selected financial information.

4. Recognition and Measurement

4.1 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 of Adjusting Events (Paragraph 9):

(a) Settlement of a Court Case

(b) Receipt of Information about Asset Impairment

(c) Determination of Cost or Proceeds

(d) Profit-sharing or Bonus Payments

(e) Discovery of Fraud or Errors

4.2 Non-adjusting Events after the Reporting Period

Rule: An entity shall not adjust the amounts recognised in its financial statements to reflect non-adjusting events after the reporting period.

Example of a Non-adjusting Event (Paragraph 11):

4.3 Dividends

Rule: If an entity declares dividends to holders of equity instruments after the reporting period, the entity shall not recognise those dividends as a liability at the end of the reporting period.

Rationale: If dividends are declared after the reporting period but before the financial statements are authorised for issue, the dividends are not recognised as a liability at the end of the reporting period because no obligation exists at that time.

Disclosure: Such dividends are disclosed in the notes in accordance with HKAS 1.

5. 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.

Key Points:

HKAS 1 specifies required disclosures if:

(a) The financial statements are not prepared on a going concern basis; OR

(b) Management is aware of material uncertainties related to events or conditions that may cast significant doubt upon the entity's ability to continue as a going concern. The events or conditions requiring disclosure may arise after the reporting period.

6. Disclosure Requirements

6.1 Date of Authorisation for Issue (Paragraph 17)

An entity shall disclose:

- The date when the financial statements were authorised for issue

- Who gave that authorisation

- If the entity's owners or others have the power to amend the financial statements after issue, the entity shall disclose that fact

Importance: It is important for users to know when the financial statements were authorised for issue, because the financial statements do not reflect events after this date.

6.2 Updating Disclosure about Conditions at the End of the Reporting Period (Paragraph 19)

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.

Example: When evidence becomes available after the reporting period about a contingent liability that existed at the end of the reporting period, the entity updates its disclosures about the contingent liability.

6.3 Non-adjusting Events after the Reporting Period (Paragraph 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.

Required disclosures for each material category of non-adjusting event:

(a) The nature of the event

(b) An estimate of its financial effect, OR a statement that such an estimate cannot be made

Examples of Non-adjusting Events Requiring Disclosure (Paragraph 22):

7. Effective Date and Transition

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

8. Basis for Conclusions - Key Points

The HKAS 10 is based on IAS 10 Events after the Reporting Period. The HKICPA considered and agreed with the IASB's basis for conclusions.

Main Change: The principal clarification in HKAS 10 relates to dividends declared after the reporting period:

9. Key Takeaways Summary Table

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