chartered accountant
Ind AS 10 (Indian Accounting Standard 10) outlines the accounting treatment for events occurring after the reporting period, specifically between the end of the reporting period (balance sheet date) and the date when financial statements are authorized for issuance. This standard categorizes these events into two types:
These events require adjustments in financial statements due to additional evidence about conditions present at the end of the reporting period. Examples include:
Accounting Treatment: Financial statements must be adjusted to reflect the effects of adjusting events.
These events do not necessitate adjustments in financial statements, as they relate to conditions arising after the reporting period. Examples include:
Accounting Treatment: While no adjustments are made, material non-adjusting events should be disclosed in the notes to the financial statements. This disclosure is crucial if omitting the event could affect users' economic decisions.
The financial statements are authorized for issuance upon approval by the Board of Directors or an equivalent authority. Events between the end of the reporting period and the authorization date need evaluation for potential adjustments or disclosures.
For non-adjusting events, disclosure should include:
Dividends declared after the reporting period are classified as non-adjusting events. The amount of the proposed dividend should be disclosed, but it is not recorded as a liability in the financial statements.
| Type of Event | Condition | Accounting Treatment | Disclosure Requirements |
|---|---|---|---|
| Adjusting | Evidence of conditions existing at the reporting period | Adjust financial statements | No specific disclosure, as adjustments are reflected in financials |
| Non-Adjusting | Indicative of conditions arising post-reporting period | No adjustment; disclose if material | Nature of event and financial effect (if significant) |
What is the definition of the “reporting period” under Ind AS 10? The reporting period typically spans one year, concluding on the balance sheet date, for which the financial statements are prepared.
What are “adjusting events” and their recognition criteria? Adjusting events provide evidence about conditions at the reporting period's end and must be reflected in the financial statements.
What are “non-adjusting events” and when should they be disclosed? Non-adjusting events arise post-reporting period and do not require adjustments but must be disclosed if material.
When is the date of authorization for financial statements? It is the date when the Board of Directors approves the financial statements for issuance.
How should dividends declared post-reporting period be treated? These are classified as non-adjusting events; only the proposed amount should be disclosed, not accrued.
How should an impairment event be treated if it occurs after the reporting period? Adjustments are required for impairments related to conditions existing at the reporting period's end but not for subsequent events.
What if a significant event occurs between the reporting period and authorization? Material non-adjusting events require disclosure; adjusting events necessitate financial statement adjustments.
How to disclose non-adjusting events without quantifiable effects? The nature of the event should be disclosed even if the financial effect cannot be estimated.
What is the treatment of liquidation events post-reporting period? If initiated before the period's end, it's an adjusting event; if decided post, it is non-adjusting and requires disclosure.
What to do about a natural disaster event occurring post-period? Disclosure is necessary for its nature and potential impact if material.
Can financial statement release be delayed due to significant events? Yes, but the company must correctly treat adjusting and non-adjusting events according to Ind AS
What are the consequences of failing to disclose required events? This may result in misleading financial statements leading to a qualified audit opinion.