An Executive Guide to IFRS: Content, Costs and Benefits to Business

Events after balance sheet date

There is a standard, IAS 10 Events after the Reporting Period, which addresses the action to be taken if a significant event occurs between the balance sheet date and the day the directors sign off the annual accounts. Many large multinationals try to publish their accounts in under three months from the balance sheet date, so the window of time for these events is only a few weeks. In essence the standard says that if an event occurs that sheds light on the situation at the year end, the figures must be adjusted. If the event will impact the following year and is material, it should be disclosed. The footnotes should specify at what date the accounts were authorized for issue, so that users can know what was the period during which such events should have been reported. The standard specifies that a decision to pay a dividend taken after balance sheet date does not result in recognition of a liability. However, a perception that the company is no longer a going concern could be a reason to go back and remeasure at balance sheet date.

IAS 10 had its name changed when the IASB decided to start calling the balance sheet the statement of financial position. Its terms distinguish between ‘adjusting events’ and ‘non-adjusting events’. An adjusting event is one that gives additional information about the situation at the previous year-end. For example, the settlement of a legal claim that was represented by a provision in the balance sheet would cause ...